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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£16.9m

Data as at 31/03/2020.

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.

Unilever5.2
DCC4.8
AstraZeneca 3.8
Uniphar3.6
Koninklijke3.5
Smurfit Kappa Group4.1
Synthomer4.0
Capgemini3.4
Forterra3.1
TI Fluid Systems2.7
Nestlé6
Tesco 4
Norcros3
Jost Werke3
Wizz Air 2
Prudential5.6
AXA4.2
Onesavings Bank2.6
Lloyds Banking Group 2.3
M&G0.7
SDL 2.3
Creo Medical Group1.8
Lime Technologies1.6
Crayon1.1
Simec Atlantis Energy0.4

There are no holdings in this category

There are no holdings in this category

There are no holdings in this category

There are no holdings in this category

There are no holdings in this category

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 (%)

Nestlé5.9
Prudential5.6
Unilever5.2
DCC4.8
AXA4.2
Smurfit Kappa Group4.1
Synthomer4.0
AstraZeneca 3.8
Tesco 3.8
Uniphar3.6
Rest of Portfolio55.1

Source: SVM, as at 31/03/2020

Sector Exposure (%)

Basic Materials7.6
Industrials21.3
Consumer Goods16.4
Health Care8.8
Consumer Services8.9
Utilities0.4
Financials15.3
Technology8.3

Source: SVM, as at 31/03/2020

Size Analysis (%)

Mega Cap (>€50bn)18.0
Large Cap (<€50bn)22.7
Mid Cap (<€10bn)19.2
Small Cap (<€1bn)27.0

Source: SVM, as at 31/03/2020

Geographic Analysis (%)

UK46.3
Switzerland9.0
France9.0
Netherlands8.7
Sweden5.4
Germany3.9
Ireland3.6
Norway1.1

Source: SVM, as at 31/03/2020

Currency Exposure (%)

Euro29.2
Sterling42.3
Norwegian Krone1.1
Swiss Franc9.0
Swedish Krona5.4

Source: SVM, as at 31/03/2020

Show piebar chart

This Month's Featured Stock

Forterra

Forterra is a good example of the opportunities available to funds that are able and willing to apply targeted scrutiny on ESG performance. This approach is particularly relevant for energy intensive industries, where outliers can often be operating under meaningful competitive advantages or disadvantages.

Forterra, a UK-based brick and block manufacturer, had several unusually long-running targets (10 years) around energy, carbon emissions, waste to landfill and water usage, which are now being updated. We believe this long period resulted in the targets falling out of date, as well as a lack of initiative on improvements, and are hoping the company will be widening and sharpening their ambitions when the new ones are announced.

The group only uses one non-financial metric in its six key performance indicators, the lost time incident frequency rate, which has even deteriorated to levels last seen before its IPO. It also experienced a serious injury incident in 2017 that resulted in a fine. That is partly offset by other examples however, such as a strong commitment to addressing something like Hand Arm Vibration Syndrome (HAVS), a widespread issue in the construction sector. Meanwhile although advances have been made on environmental performance, it has been measured on an intensity basis, and has been warped by changes in capacity utilisation and product mix.

By applying an industry-specific approach across Europe, we will be in a good position to be able to fairly scrutinise Forterra’s progress and engage on the most relevant areas for further improvement.

Performance

Performance (%)

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FundIndex
1 month-18.3-12.3
2020 YTD-29.0-18.8
1 year-17.8-10.0
3 years-14.1-4.5
5 years2.315.2
Since launch*143.379.5
Source: Lipper, as at 31/03/2020, 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 31/03/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
248.40p
0.28%
Class B
275.30p
0.29%

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

Source: State Street, as at 22/05/2020.

Commentary

Equity markets fell precipitously in March as the spread of COVID-19 became apparent. National governments responded to the pandemic by ‘locking down’ their economies in an attempt to contain the spread of the virus and prevent their health systems from being overwhelmed. The placing of the majority of the global economy into a form of suspended animation is unprecedented and has created significant financial and economic stress. Policy makers responded appropriately. Central banks injected significant liquidity into the system while national governments took steps to support household and corporate balance sheets. The significant policy response led to equities recouping some of their losses. Nonetheless, the FTSE Europe declined  -12.0% over the month. The fund’s performance was disappointing, returning  -18.3%.

Last month we commented how we were positioned for a recovery in economic growth both in the UK and elsewhere. This was detrimental to the fund’s performance in both February and March. The fund’s financial holdings were weak with Prudential Plc, AXA, LLoyds and OneSavings Bank all declining. The most pernicious impact on the portfolio, however, was through those businesses who in normal circumstances should be fairly resilient. Building materials businesses with strong balance sheets such as Forterra and Norcros have traded through many downturns, but how strong does a balance sheet need to be if there is no revenue? SDL, Creo Medical and Alpha Financial Consulting have no debt and cash on the balance sheet but what will revenue be? All of these stocks were significant negative contributors during the month. New holdings, Nestle, DSM, Astrazeneca and Roche all made meaningful positive contributions to performance.

Trading activity was significant. In response to the emerging economic threat from the coronavirus we reduced the cyclicality of the portfolio in late February and very early March. During this period the holdings in Ashtead, Informa, Biffa, Legal and General and Covestro were exited at significantly higher prices than available today. The holding in Wizz Air was reduced. The significant sell-off mid-month was used to add new positions in Nestle, Astrazeneca, Roche, and DSM. These are stocks which we have liked for some time but where we had felt the valuation was unattractive. The indiscriminate sell-off enabled us to initiate positions at very attractive prices.

We’ve written before about our unscientific, but hitherto wholly accurate, ‘muddle-through’ philosophy. Even in the depths of the global financial crisis, when investors could have been mistaken for thinking the sky was falling, we stuck to this tenet. While times were undeniably hard, the rhythm of daily life continued much the same as before. This is different. Coronavirus’ impact is not limited to the financial realm, significant as this will be, but will influence how society is structured and people behave. In recognition of this uncertainty we have retained significant flexibility in order to respond to opportunities as they evolve.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/03/2020.

Equity markets fell precipitously in March as the spread of COVID-19 became apparent. National governments responded to the pandemic by ‘locking down’ their economies in an attempt to contain the spread of the virus and prevent their health systems from being overwhelmed. The placing of the majority of the global economy into a form of suspended animation is unprecedented and has created significant financial and economic stress. Policy makers responded appropriately. Central banks injected significant liquidity into the system while national governments took steps to support household and corporate balance sheets. The significant policy response led to equities recouping some of their losses. Nonetheless, the FTSE Europe declined  -12.0% over the month. The fund’s performance was disappointing, returning  -18.3%.

Last month we commented how we were positioned for a recovery in economic growth both in the UK and elsewhere. This was detrimental to the fund’s performance in both February and March. The fund’s financial holdings were weak with Prudential Plc, AXA, LLoyds and OneSavings Bank all declining. The most pernicious impact on the portfolio, however, was through those businesses who in normal circumstances should be fairly resilient. Building materials businesses with strong balance sheets such as Forterra and Norcros have traded through many downturns, but how strong does a balance sheet need to be if there is no revenue? SDL, Creo Medical and Alpha Financial Consulting have no debt and cash on the balance sheet but what will revenue be? All of these stocks were significant negative contributors during the month. New holdings, Nestle, DSM, Astrazeneca and Roche all made meaningful positive contributions to performance.

Trading activity was significant. In response to the emerging economic threat from the coronavirus we reduced the cyclicality of the portfolio in late February and very early March. During this period the holdings in Ashtead, Informa, Biffa, Legal and General and Covestro were exited at significantly higher prices than available today. The holding in Wizz Air was reduced. The significant sell-off mid-month was used to add new positions in Nestle, Astrazeneca, Roche, and DSM. These are stocks which we have liked for some time but where we had felt the valuation was unattractive. The indiscriminate sell-off enabled us to initiate positions at very attractive prices.

We’ve written before about our unscientific, but hitherto wholly accurate, ‘muddle-through’ philosophy. Even in the depths of the global financial crisis, when investors could have been mistaken for thinking the sky was falling, we stuck to this tenet. While times were undeniably hard, the rhythm of daily life continued much the same as before. This is different. Coronavirus’ impact is not limited to the financial realm, significant as this will be, but will influence how society is structured and people behave. In recognition of this uncertainty we have retained significant flexibility in order to respond to opportunities as they evolve.

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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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