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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 objective of the Fund is to achieve capital growth over the long term (5 years or more) and it aims to outperform the MSCI Europe Index. It adopts a positive engagement approach toward investment and enters into meaningful dialogue with companies regarding environmental, social and corporate governance issues. Investments are made in European equities 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
BenchmarkMSCI Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£19m

Data as at 28/02/2021.

Fund Managers

Neil Veitch
Global & UK Investment Director
15
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
15
Years at SVM
26
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.

Synthomer6.3
Smurfit Kappa Group5.7
Forterra4.5
Rexel4.2
Alpha FMC3.8
Prudential5.1
OSB Group4.1
Lloyds Banking Group 3.8
Allianz3.6
AXA3.3
Norcros5.6
Jost Werke3.4
Tesco 2.3
Vistry Group2.2
Nordic Entertainment Group1.9
Uniphar4.9
DCC4.2
Roche Holdings2.5
AstraZeneca 2.2
Creo Medical Group4.0
Koninklijke Philips2.3
Barco1.9

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 (%)

Synthomer6.3
Smurfit Kappa Group5.7
Norcros5.6
Prudential5.1
Uniphar4.9
Forterra4.5
Rexel4.2
DCC4.2
OSB Group4.1
Creo Medical Group4.0
Rest of Portfolio51.3

Source: SVM, as at 28/02/2021

Sector Exposure (%)

Industrials41.0
Financials20.0
Health Care10.9
Consumer Services9.2
Consumer Goods8.9
Basic Materials6.3
Technology2.7

Source: SVM, as at 28/02/2021

Size Analysis (%)

Mega Cap (>€50bn)8.3
Large Cap (<€50bn)23.3
Mid Cap (<€10bn)38.3
Small Cap (<€1bn)29.1

Source: SVM, as at 28/02/2021

Geographic Analysis (%)

UK58.4
Ireland10.6
France10.3
Germany8.9
Sweden4.1
Switzerland2.5
Netherlands2.3
Belgium1.9

Source: SVM, as at 28/02/2021

Currency Exposure (%)

Euro37.8
Sterling54.7
Swiss Franc2.5
Swedish Krona4.1

Source: SVM, as at 28/02/2021

Show piebar chart

This Month's Featured Stock

CRH

Irish building products company CRH will report its full year 2020 results in March which should highlight the impact of the pandemic on their business which we expect to be modest with only a low single digit decline in revenues. Despite this the business remains in rude health and well positioned to benefit as countries emerge from lock down and building activity rebounds boosted by the numerous stimulus packages now in place worldwide. At the same time the company’s balance sheet is the strongest it has been for some years allowing management to continue with the value adding acquisition strategy which has been their hallmark for many years.

The company does, however, also need to address, what is an industry-wide issue of high CO2 emissions from their operations. In particular, cement production has a reputation as one of the worst polluting industries globally. It is here we have focussed our engagement efforts with CRH in an attempt to change the overall environmental profile of the company. And, cognisant of the impact this issue may have on their long-term financial future as well as on the company’s reputation, management do appear to be moving in the right direction. At a meeting towards the end of last year they highlighted the €177 million earmarked for environmental projects as well as a host of industry collaborations to search for a greener alternative and there are high hopes a viable, industrially scalable alternative can be found. In the meantime, we will continue to address this issue with CRH and look forward to further developments in the coming years.

Performance

Performance (%)

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FundIndex
1 month4.20.6
2021 YTD3.3-1.3
1 year21.010.5
3 years10.813.4
5 years52.556.9
Since launch*260.1131.4
Source: Lipper, as at 28/02/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
20201.82.7-0.9
201924.519.8+4.7
2018-16.6-9.0-7.6
201719.215.3+3.9
201610.119.6-9.5
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
332.30p
-0.09%
Class B
370.50p
-0.05%

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

Source: State Street, as at 08/03/2021.

Commentary

Equities were mixed during February. Markets bounced early in the month as concerns over new virus variants and their potential to reduce vaccine efficacy eased. Improving vaccine sentiment and generally better than expected economic data led to a sell-off in government bonds. The increase in yields accelerated into month-end as Fed Chairman Powell testified that he remained unconcerned about the inflation outlook and US jobs data came in ahead of expectations. The volatility in the bond market led to a pullback in equities. The fund returned 4.2% for the month versus 0.6% for the MSCI Europe index.

The increase in bond yields was particularly pronounced in the US where investors have become concerned that President Biden’s stimulus package will result in an increase in inflation. This has led to a spirited debate between economists about the potential for inflationary pressures to become entrenched and potentially choke off the economic recovery. The debate has not just been confined to the US. Bank of England chief economist, Andy Haldane, warned that central banks ran the risk of becoming complacent on inflation as the economy recovers from the coronavirus pandemic.

Outside of a resurgence in the virus, the potential for significantly higher bond yields is the biggest risk facing equity markets. Every strategist/economist/fund manager has offered their view on what rising yields mean for equities. The honest answer is that no-one really knows. Economists still can’t even agree what the primary determinant of long-term interest rates are. The best guess, somewhat counterintuitively, is short-term rates. Markets are complex, adaptive systems where relatively small changes in inputs can result in significant changes to outcomes. We believe that a rise in yields is more likely to result in changing relative valuations within markets, rather than the catalyst for a sustained market reversal. Volatility, however, will remain higher than usual.

At a stock level the fund benefitted from its exposure to some of the more economically sensitive sectors of the market. Financials gained as the yield curve steepened further. The sector was also buoyed by a generally supportive earnings season. Lloyds results came in ahead of expectations with the closely watched net interest margin proving resilient. Prudential bounced following last month’s overreaction to the announcement that it was going to ‘spin-out’ Jackson, its US life business, as opposed to an IPO. Reopening plays, Barco and John Menzies, rose as virus optimism increased. Industrial distributor, Rexel, jumped as results came in ahead of expectations and it raised its medium-term margin targets. Investor’s responded positively to CapGemini’s results announcement. The company is an attractive play on the ongoing digitalisation of the global economy.

M&A activity was again a feature of the market. The fund’s largest holding, specialty chemical maker, Synthomer, was speculated to have been approached by private equity firm, CVC Capital. Pointedly, Synthomer announced that it was not currently in takeover discussions, but never stated that it had not been approached. Takeover rumours swirled around a number of other mid-cap companies. Corporate financiers are busy and we would expect to see more bids over the next few weeks and months. Such an environment is generally positive for the fund’s performance.

New holding Nordic Entertainment declined as sentiment towards ‘stay at home’ beneficiaries turned negative. Alpha FMC drifted on a lack of news.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 28/02/2021.

Equities were mixed during February. Markets bounced early in the month as concerns over new virus variants and their potential to reduce vaccine efficacy eased. Improving vaccine sentiment and generally better than expected economic data led to a sell-off in government bonds. The increase in yields accelerated into month-end as Fed Chairman Powell testified that he remained unconcerned about the inflation outlook and US jobs data came in ahead of expectations. The volatility in the bond market led to a pullback in equities. The fund returned 4.2% for the month versus 0.6% for the MSCI Europe index.

The increase in bond yields was particularly pronounced in the US where investors have become concerned that President Biden’s stimulus package will result in an increase in inflation. This has led to a spirited debate between economists about the potential for inflationary pressures to become entrenched and potentially choke off the economic recovery. The debate has not just been confined to the US. Bank of England chief economist, Andy Haldane, warned that central banks ran the risk of becoming complacent on inflation as the economy recovers from the coronavirus pandemic.

Outside of a resurgence in the virus, the potential for significantly higher bond yields is the biggest risk facing equity markets. Every strategist/economist/fund manager has offered their view on what rising yields mean for equities. The honest answer is that no-one really knows. Economists still can’t even agree what the primary determinant of long-term interest rates are. The best guess, somewhat counterintuitively, is short-term rates. Markets are complex, adaptive systems where relatively small changes in inputs can result in significant changes to outcomes. We believe that a rise in yields is more likely to result in changing relative valuations within markets, rather than the catalyst for a sustained market reversal. Volatility, however, will remain higher than usual.

At a stock level the fund benefitted from its exposure to some of the more economically sensitive sectors of the market. Financials gained as the yield curve steepened further. The sector was also buoyed by a generally supportive earnings season. Lloyds results came in ahead of expectations with the closely watched net interest margin proving resilient. Prudential bounced following last month’s overreaction to the announcement that it was going to ‘spin-out’ Jackson, its US life business, as opposed to an IPO. Reopening plays, Barco and John Menzies, rose as virus optimism increased. Industrial distributor, Rexel, jumped as results came in ahead of expectations and it raised its medium-term margin targets. Investor’s responded positively to CapGemini’s results announcement. The company is an attractive play on the ongoing digitalisation of the global economy.

M&A activity was again a feature of the market. The fund’s largest holding, specialty chemical maker, Synthomer, was speculated to have been approached by private equity firm, CVC Capital. Pointedly, Synthomer announced that it was not currently in takeover discussions, but never stated that it had not been approached. Takeover rumours swirled around a number of other mid-cap companies. Corporate financiers are busy and we would expect to see more bids over the next few weeks and months. Such an environment is generally positive for the fund’s performance.

New holding Nordic Entertainment declined as sentiment towards ‘stay at home’ beneficiaries turned negative. Alpha FMC drifted on a lack of news.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

If you would like a copy of any historic factsheets please email info@svmonline.co.uk

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 SS&C Financial Services International Limited and SS&C Financial Services Europe Limited 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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