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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£17.7m

Data as at 31/10/2020.

Fund Managers

Neil Veitch
Global & UK Investment Director
14
Years at SVM
24
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.

Synthomer5.9
Smurfit Kappa Group4.9
Alpha FMC3.7
CRH3.5
Forterra3.4
Nestlé5.2
Unilever5.2
Norcros4.5
Tesco 4.1
Jost Werke2.5
Uniphar6.4
Roche Holdings4.1
AstraZeneca 4.0
DCC4.0
Prudential4.5
AXA3.5
Onesavings Bank3.1
Lloyds Banking Group 1.9
Allianz1.5
SDL 3.7
Koninklijke Philips2.3
Creo Medical Group2.3
Barco1.4
Simec Atlantis Energy0.9

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 IA sector.

Top 10 Holdings (%)

Uniphar6.4
Synthomer5.9
Nestlé5.2
Unilever5.2
Smurfit Kappa Group4.9
Norcros4.5
Prudential4.5
Tesco 4.1
Roche Holdings4.1
AstraZeneca 4.0
Rest of Portfolio51.1

Source: SVM, as at 31/10/2020

Sector Exposure (%)

Industrials30.0
Consumer Goods18.1
Financials14.5
Health Care13.2
Consumer Services10.5
Technology6.5
Basic Materials5.9
Utilities0.9

Source: SVM, as at 31/10/2020

Size Analysis (%)

Mega Cap (>€50bn)20.0
Large Cap (<€50bn)23.7
Mid Cap (<€10bn)22.7
Small Cap (<€1bn)33.1

Source: SVM, as at 31/10/2020

Geographic Analysis (%)

UK56.7
Switzerland9.3
Germany8.0
Netherlands7.4
Ireland6.4
France5.8
Sweden4.5
Belgium1.4

Source: SVM, as at 31/10/2020

Currency Exposure (%)

Euro37.6
Sterling48.2
Swiss Franc9.3
Swedish Krona4.5

Source: SVM, as at 31/10/2020

Show piebar chart

This Month's Featured Stock

Roche

Although perennially maligned in the eyes of the public and media, big pharma has generally taken a willing and proactive approach in order to help society solve the COVID-19 emergency. Swiss pharma giant Roche has been particularly well placed to play an important role, given its large diagnostics arm, which swiftly dedicated resources to produce both virus and antibody detection tests. The pharmaceutical arm worked on finding possible solutions from its existing drugs portfolio. Importantly it has also tried to ensure equal pricing and access at all times.

The pandemic has not been all positive for Roche though, with the delays and capacity issues in hospitals postponing much essential healthcare treatment. But longer term, we see Roche as readying itself for the next waves of innovation in treatment modalities; gene, cell, bacterial and RNA-based therapies all being examples. Its family shareholding structure is a potential competitive advantage in taking a longer term view on investments in this area, while the negative impact of biosimilar launches on its existing products has been so far more benign than feared. Roche has launched 18 new products since 2012 that have helped offset the pressure.

We are working with the company to improve disclosure around some of the more industry-specific ESG challenges, not only access to medicines, but also areas such as pharmaceutical waste management and ethical marketing. We can see a significant opportunity for Roche to become an industry leader in social responsibility.

Performance

Performance (%)

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FundIndex
1 month-4.0-5.8
2020 YTD-15.0-11.3
1 year-5.4-8.5
3 years-11.2-3.6
5 years19.733.6
Since launch*191.1102.5
Source: Lipper, as at 31/10/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
2020-2.8-4.5+1.7
2019-4.05.5-9.5
20182.43.1-0.7
201721.919.2+2.7
201610.720.3-9.6
Source: Lipper, as at 31/10/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
299.40p
-0.99%
Class B
333.00p
-0.98%

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

Source: State Street, as at 27/11/2020.

Commentary

Equity markets delivered their worst monthly returns since March as the prospect of further lockdowns spooked investors. As has been the case throughout 2020, the disease outlook remains the key variable for markets. Rising infections and increasing hospitalisations led many European countries to tighten lockdown restrictions. Heightened risk aversion due to the Covid situation was exacerbated further by the impending US election. The fund returned -4.0% versus the FTSE Europe that declined -5.8%.

Both France and Germany announced the reinstatement of nationwide lockdowns to combat the steady increase in infections. This provided political cover for Boris Johnson to reconsider the merits of a similar move in the UK. After a period of vacillation, and in response to studies carried out by the government’s scientific advisory group suggesting that the number of daily Covid deaths was in line with a “reasonable worst case” scenario, he announced the ushering in of a partial lockdown. While less restrictive than the lockdown earlier in the year, it will nonetheless have a significant impact on economic activity. Investors’ initial reactions, however, appear to be to largely look through the short-term economic impact and focus on the prospect of a successful vaccine and economic recovery in 2021. Should there be any material slippage in the timeline for a vaccine markets will respond negatively.

With the mid-November deadline for trade talks between the UK and EU fast approaching, both sides talked positively about the prospects of a deal. The reduced likelihood of a ‘no deal’ outcome initially led to rebound in sterling although this petered out as risk assets came under pressure later in the month. A number of deep-rooted disagreements still need to be overcome, but we remain optimistic that a deal will be concluded.

Synthomer shares rose strongly as the group’s trading update highlighted that profits were ahead of expectations. While all divisions contributed positively, the group’s nitrile business, a producer of the polymer used in the manufacture of latex gloves, enjoyed particularly robust trading on the back of the Covid pandemic. While demand may reduce slightly from current levels, the pandemic has likely encouraged a longer lasting change in consumer behaviour that will support future growth. The improved trading performance has fed through into higher cash generation and lower debt, enhancing the prospect of further M&A activity.  Shares in Norcros gained as the manufacturer and supplier of bathroom accessories and materials announced that sales and profitability had rebounded sharply and would now be ahead of analyst’s expectations. A sharp focus on controlling costs and preserving cash led to a significant reduction in debt and the group now expects gearing to be down to 0.2x at the half year. This leaves the business on a very sound footing for when demand fully recovers. TI Fluid gained as sentiment towards the automotive sector improved as demand remained robust.

DCC declined as a couple of analysts downgraded the stock due to longer-term concerns around its end-market exposures and capital allocation. We think these concerns are overstated and the group’s core business is highly defensive, its balance sheet robust and its valuation attractive. Nonetheless, after raising equity to fund acquisitions the company has been slow to deploy it and a well-structured deal is probably required for the shares to recover and make new highs. Barco declined as third quarter results disappointed. Both AXA and Prudential Plc came under pressure as the economic outlook deteriorated.

There was limited trading activity.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/10/2020.

Equity markets delivered their worst monthly returns since March as the prospect of further lockdowns spooked investors. As has been the case throughout 2020, the disease outlook remains the key variable for markets. Rising infections and increasing hospitalisations led many European countries to tighten lockdown restrictions. Heightened risk aversion due to the Covid situation was exacerbated further by the impending US election. The fund returned -4.0% versus the FTSE Europe that declined -5.8%.

Both France and Germany announced the reinstatement of nationwide lockdowns to combat the steady increase in infections. This provided political cover for Boris Johnson to reconsider the merits of a similar move in the UK. After a period of vacillation, and in response to studies carried out by the government’s scientific advisory group suggesting that the number of daily Covid deaths was in line with a “reasonable worst case” scenario, he announced the ushering in of a partial lockdown. While less restrictive than the lockdown earlier in the year, it will nonetheless have a significant impact on economic activity. Investors’ initial reactions, however, appear to be to largely look through the short-term economic impact and focus on the prospect of a successful vaccine and economic recovery in 2021. Should there be any material slippage in the timeline for a vaccine markets will respond negatively.

With the mid-November deadline for trade talks between the UK and EU fast approaching, both sides talked positively about the prospects of a deal. The reduced likelihood of a ‘no deal’ outcome initially led to rebound in sterling although this petered out as risk assets came under pressure later in the month. A number of deep-rooted disagreements still need to be overcome, but we remain optimistic that a deal will be concluded.

Synthomer shares rose strongly as the group’s trading update highlighted that profits were ahead of expectations. While all divisions contributed positively, the group’s nitrile business, a producer of the polymer used in the manufacture of latex gloves, enjoyed particularly robust trading on the back of the Covid pandemic. While demand may reduce slightly from current levels, the pandemic has likely encouraged a longer lasting change in consumer behaviour that will support future growth. The improved trading performance has fed through into higher cash generation and lower debt, enhancing the prospect of further M&A activity.  Shares in Norcros gained as the manufacturer and supplier of bathroom accessories and materials announced that sales and profitability had rebounded sharply and would now be ahead of analyst’s expectations. A sharp focus on controlling costs and preserving cash led to a significant reduction in debt and the group now expects gearing to be down to 0.2x at the half year. This leaves the business on a very sound footing for when demand fully recovers. TI Fluid gained as sentiment towards the automotive sector improved as demand remained robust.

DCC declined as a couple of analysts downgraded the stock due to longer-term concerns around its end-market exposures and capital allocation. We think these concerns are overstated and the group’s core business is highly defensive, its balance sheet robust and its valuation attractive. Nonetheless, after raising equity to fund acquisitions the company has been slow to deploy it and a well-structured deal is probably required for the shares to recover and make new highs. Barco declined as third quarter results disappointed. Both AXA and Prudential Plc came under pressure as the economic outlook deteriorated.

There was limited trading activity.

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.

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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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