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SVM All Europe SRI Fund

SVM All Europe SRI Fund

Improving the responsibility of companies

Launched in 2006, this fund aims to achieve long term growth by investing in UK and European businesses that meet SVM's socially responsible criteria and where the current valuation offers an opportunity.

This Fund looks to improve corporate behaviour by using its influence as a shareholder in the most constructive way possible.

SVM All Europe SRI Fund

Improving the responsibility of companies

Launched in 2006, this fund aims to achieve long term growth by investing in UK and European businesses that meet SVM's socially responsible criteria and where the current valuation offers an opportunity.

This Fund looks to improve corporate behaviour by using its influence as a shareholder in the most constructive way possible.

Overview

Fund Objective

The Fund aims to achieve medium to long-term capital growth and to outperform the FTSE World Europe Index. It adopts a positive engagement approach toward investment and enters into meaningful dialogue with companies regarding social and environmental issues. Investments are made in European stocks and other permitted securities.

Approach

SVM All Europe SRI Fund invests in well-managed, attractively priced businesses while at the same time seeking to improve their awareness, reporting and impact on the environment, society and corporate governance (ESG).

Our fund, which can invest right across the market capitalisation spectrum, is perfectly positioned to take advantage of the host of investment opportunities that this presents. We aim to find “hidden gems” with a strong earnings profile. We take a private equity-style approach to analysing their intrinsic value and their prospects for long-term earnings growth.

Analysis and research on ESG performance is an integrated part of our investment approach. Our purpose with each investment in the portfolio is to drive activities and processes that will improve companies’ impact on the environment and society. Companies are scored on a range of ESG criteria (with certain industries excluded altogether). We then engage with company management and invest on the basis of clear evidence and ongoing potential for improvement.

Investing for ESG impact in these undiscovered opportunities, you will own a portfolio that is different to most other Pan-European equity funds, and will perform differently too. The fund is designed to access specific growth opportunities in improving companies in Europe while diversifying your Pan-European equity exposure away from mainstream investments and indices.

You can invest with confidence in a fund that not only capitalises on our ability to identify undiscovered investment opportunities but also maximises the opportunity to influence corporate behaviour for the benefit of both the environment and society.

Fund Details

Launch Date31 October 2006
BenchmarkFTSE World Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£20.1m

Data as at 31/05/2020.

Fund Managers

Neil Veitch
Global & UK Investment Director
14
Years at SVM
23
Industry Experience

Neil joined SVM in 2006 to manage the SVM UK Opportunities Fund. He is also lead manager of the SVM World Equity Fund and co manager of the SVM All Europe SRI Fund.

Prior to joining SVM, Neil was responsible for UK mid & small cap investments at Dutch merchant bank, Kempen Capital Management, where he also managed pan European mandates.

Academic Qualifications:
BA (Hons) Economics
MSc Investment Management

Professional Qualifications:

CFA

Hugh Cuthbert
European Investment Manager
14
Years at SVM
25
Industry Experience

Hugh is lead manager of SVM Continental Europe Fund and co manager of SVM All Europe SRI Fund.

Prior to joining SVM, he spent five years with Kempen Capital Management where he was responsible for the management of pan European equities.

Academic Qualifications:
BA Public Administration

Professional Qualifications:

ASIP

Portfolio

Risk Baskets

To help understand the overall balance of the portfolio, stocks are allocated to one of eight risk groups: defensive, cyclical, stable financial, unstable financial, consumer cyclical, oil & gas, mining and finally technology. Most of these groups are self explanatory but financials deserve some clarity. All financials are inherently unstable but in the main, Lloyd’s underwriters and General Insurers take less balance sheet risk, so are relatively more stable than Banks or Life Assurers.

Seeing the portfolio broken down into these categories allows an understanding of how aggressive or defensive the overall portfolio is, and where risk is being taken.

Synthomer4.4
Smurfit Kappa Group3.9
Capgemini3.5
CRH3.0
TI Fluid Systems3.0
Nestlé5.2
Unilever4.6
Tesco 4.0
Norcros3.3
Jost Werke1.8
DCC5.4
Roche Holdings4.9
Uniphar4.6
AstraZeneca 3.9
EssilorLuxottica3.1
SDL 2.3
Barco2.1
Koninklijke Philips2.0
Creo Medical Group2.0
Prudential4.8
AXA3.7
Onesavings Bank2.4
Lloyds Banking Group 1.8
M&G0.7

There are no holdings in this category

There are no holdings in this category

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Portfolio Structure

As an unconstrained fund we invest in our highest conviction ideas irrespective of market capitalisation, country or sector. As a consequence The SVM All Europe SRI Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IMA sector.

Top 10 Holdings (%)

DCC5.4
Nestlé5.2
Roche Holdings4.9
Prudential4.8
Uniphar4.6
Unilever4.6
Synthomer4.4
Tesco 4.0
Smurfit Kappa Group3.9
AstraZeneca 3.9
Rest of Portfolio54.3

Source: SVM, as at 31/05/2020

Sector Exposure (%)

Basic Materials4.4
Industrials28.1
Consumer Goods16.7
Health Care15.9
Consumer Services8.6
Utilities0.3
Financials13.4
Technology9.1

Source: SVM, as at 31/05/2020

Size Analysis (%)

Mega Cap (>€50bn)18.6
Large Cap (<€50bn)27.9
Mid Cap (<€10bn)23.6
Small Cap (<€1bn)26.3

Source: SVM, as at 31/05/2020

Geographic Analysis (%)

UK48.9
France11.9
Switzerland10.1
Netherlands7.0
Sweden5.9
Ireland4.6
Germany4.6
Norway1.3

Source: SVM, as at 31/05/2020

Currency Exposure (%)

Euro37.2
Sterling42.0
Norwegian Krone1.3
Swiss Franc10.1
Swedish Krona5.9

Source: SVM, as at 31/05/2020

Show piebar chart

This Month's Featured Stock

JDE Peet’s

The European IPO market had to endure an extended hibernation thanks to COVID-19, with underwriters waiting for signs of financial market stability in order to restart capital market activities. This has resulted in only the most resilient businesses being put forward for listings, and with signs of improvement in the pandemic situation in early April, a few have now made it to market.

JDE Peet’s is one example, and is now a new constituent in both the European market and the fund. The company was formed with the backing of a German family, well known for their involvement with Reckitt Benckiser. After acquiring Peet’s Coffee in 2012, further acquisitions were made to create a global leader in coffee and tea. As a pure play on one of the most attractive consumer staples categories, we felt JDE had the right brand portfolio, track record and initial pricing to create attractive future returns.

What we believe is most underappreciated is that, while premiumisation has been well-advanced by Starbucks in the out of home category, there is still a long runway for companies like JDE to adopt the strategy for at-home consumption. This has already been evident in the growth of revenues per cup from around 4 to 6 Euro cents, but that remains far off the several Euros level for high-end out of home coffee. We believe this can also be driven through a rigorous approach to ESG, with coffee one of the most advanced categories in tying together sustainability and pricing.

Performance

Performance (%)

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FundIndex
1 month5.17.4
2020 YTD-16.9-6.6
1 year-4.61.9
3 years-7.62.5
5 years15.628.7
Since launch*184.7104.9
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
2020-17.8-9.8-8.0
2019-4.72.4-7.1
20189.64.4+5.2
201717.621.6-4.0
20161.3-1.1+2.4
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
266.60p
0.30%
Class B
295.60p
0.31%

SVM funds are priced every working day at 12 noon UK time and prices are updated here shortly afterwards.

Source: State Street, as at 03/07/2020.

Commentary

Equities made further gains in May. Markets continue to be acutely sensitive to news flow on the spread of the disease. Confidence is fragile but progress remains positive. Those countries that have relaxed restrictions have yet to see a meaningful second wave. There will, of course, be setbacks along the way but we are more optimistic than we were six to eight weeks ago. Economic data continues to be heavily distorted by the nature of the lockdown. The severity of the slowdown has considerably reduced the utility of much of the higher frequency economic data that investors often use to identify inflection points. Nonetheless, here as well there are some signs of encouragement. The fund rose 5.1% versus the FTSE Europe that gained 7.1%.

The most notable feature of returns over the month was the substantial outperformance of ‘growth’ versus ‘value’. As we have commented before this is not a surprise given the current market backdrop. Economic activity has collapsed and central banks have committed to hold interest rates at abnormally low levels for the foreseeable future. Liquidity has exploded with money supply ballooning. This creates almost the perfect backdrop for ‘long duration’ growth stocks. Indeed, many of this year’s strongest performers are companies seeking to benefit from ‘disruptive’ technologies whose economic payback will not be seen for many years. We aren’t averse to ‘growth’, nor oblivious to the risk of an outdated world view, but seek to ensure that any reward is commensurate with the risk taken. In a paradigm characterised by a central bank backstop the extent to which valuation matters, however, is a legitimate debate. The pattern reversed slightly towards the end of the month as some tentative improvements in the economic data began to emerge.

Irish healthcare company, Uniphar, was the largest positive contributor to the fund’s performance. There was nothing specific to explain the rise in the share price but most likely it was a function of increased investor awareness. The company listed last year and has struggled to gain much traction with institutional investors. Maiden full year results in late March were solid rather than spectacular but served to remind investors of its strong cash generation and growth opportunities. DCC gained as its full year results highlighted the resilience of its business model, its financial strength, and the acquisition opportunities that might arise as a consequence of the pandemic. Notably it raised the dividend at a time when many payouts are under pressure. va-Q-tec rose as 1q20 results delivered significant growth. Scandinavian IT stocks, Lime Technologies and Crayon, benefitted from positive sentiment towards the technology space. Despite the lockdown we are in active dialogue with our portfolio holdings as well as many other businesses. Considerable uncertainty is the overarching feature of most of these conversations. Relative to expectations at the outset of the crisis, however, the outcome for most companies has been better than anticipated. Business development is challenging but many see the crisis as an opportunity to right-size their operations. This has implications for employment and aggregate final demand, but hopefully will result in a more productive economy over the longer term.

UK cyclicals, Forterra and Norcros, were the two largest negative contributors to performance. Both stocks slumped as investors fretted over the shape of the economic recovery and how quickly construction activity will rebound.

New positions were initiated in AB Foods, CRH, EssilorLuxxotica, JD Peet, Barco and Philips NV.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/05/2020.

Equities made further gains in May. Markets continue to be acutely sensitive to news flow on the spread of the disease. Confidence is fragile but progress remains positive. Those countries that have relaxed restrictions have yet to see a meaningful second wave. There will, of course, be setbacks along the way but we are more optimistic than we were six to eight weeks ago. Economic data continues to be heavily distorted by the nature of the lockdown. The severity of the slowdown has considerably reduced the utility of much of the higher frequency economic data that investors often use to identify inflection points. Nonetheless, here as well there are some signs of encouragement. The fund rose 5.1% versus the FTSE Europe that gained 7.1%.

The most notable feature of returns over the month was the substantial outperformance of ‘growth’ versus ‘value’. As we have commented before this is not a surprise given the current market backdrop. Economic activity has collapsed and central banks have committed to hold interest rates at abnormally low levels for the foreseeable future. Liquidity has exploded with money supply ballooning. This creates almost the perfect backdrop for ‘long duration’ growth stocks. Indeed, many of this year’s strongest performers are companies seeking to benefit from ‘disruptive’ technologies whose economic payback will not be seen for many years. We aren’t averse to ‘growth’, nor oblivious to the risk of an outdated world view, but seek to ensure that any reward is commensurate with the risk taken. In a paradigm characterised by a central bank backstop the extent to which valuation matters, however, is a legitimate debate. The pattern reversed slightly towards the end of the month as some tentative improvements in the economic data began to emerge.

Irish healthcare company, Uniphar, was the largest positive contributor to the fund’s performance. There was nothing specific to explain the rise in the share price but most likely it was a function of increased investor awareness. The company listed last year and has struggled to gain much traction with institutional investors. Maiden full year results in late March were solid rather than spectacular but served to remind investors of its strong cash generation and growth opportunities. DCC gained as its full year results highlighted the resilience of its business model, its financial strength, and the acquisition opportunities that might arise as a consequence of the pandemic. Notably it raised the dividend at a time when many payouts are under pressure. va-Q-tec rose as 1q20 results delivered significant growth. Scandinavian IT stocks, Lime Technologies and Crayon, benefitted from positive sentiment towards the technology space. Despite the lockdown we are in active dialogue with our portfolio holdings as well as many other businesses. Considerable uncertainty is the overarching feature of most of these conversations. Relative to expectations at the outset of the crisis, however, the outcome for most companies has been better than anticipated. Business development is challenging but many see the crisis as an opportunity to right-size their operations. This has implications for employment and aggregate final demand, but hopefully will result in a more productive economy over the longer term.

UK cyclicals, Forterra and Norcros, were the two largest negative contributors to performance. Both stocks slumped as investors fretted over the shape of the economic recovery and how quickly construction activity will rebound.

New positions were initiated in AB Foods, CRH, EssilorLuxxotica, JD Peet, Barco and Philips NV.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

Availability

The fund is a sub-fund within the SVM ICVC Fund, a UK domiciled Open Ended Investment Company, with UCITS status. The Funds are regulated by the UK Financial Conduct Authority.

Dealing into the fund is available daily. Deals are accepted on a forward pricing basis, with 24 hours notice. SVM employs International Financial Data Services (IFDS Group) as third party administrator and transfer agent to our funds.

How to Invest
You can invest directly with us or through a wide variety of third party wraps, supermarkets and life companies.

For each fund in the SVM ICVC range we offer a B share class which is our lowest priced clean share class.

Share class availability via third parties varies depending on their model.

Dealing - Funds
0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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