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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. The Fund will invest at least 80% in equities and equity related instruments which are dealt in or traded on all European Eligible Securities Markets. The Fund may invest in 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.

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Fund Details

Launch Date31 October 2006
BenchmarkMSCI Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£17.5m

Data as at 30/04/2022.

Fund Managers

Neil Veitch
Global & UK Investment Director
16
Years at SVM
25
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
16
Years at SVM
27
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.

Alpha FMC7.9
Smurfit Kappa Group5.7
Rexel5.3
Synthomer4.5
Capgemini4.2
OSB Group5.3
Lloyds Banking Group 4.9
AXA4.9
Prudential4.0
Legal & General2.5
Norcros6.0
Tesco 3.1
Dalata Hotel Group2.5
Jost Werke2.1
Uniphar4.5
DCC3.5
Smith & Nephew2.6
Sedana Medical0.7
Apontis Pharma0.6
Creo Medical Group2.8
LungLife AI2.0
Calnex Solutions1.1
ActiveOps0.6

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

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 (%)

Alpha FMC7.9
Norcros6.0
Smurfit Kappa Group5.7
OSB Group5.3
Rexel5.3
Lloyds Banking Group 4.9
AXA4.9
Synthomer4.5
Uniphar4.5
Capgemini4.2
Rest of Portfolio46.8

Source: SVM, as at 30/04/2022

Sector Exposure (%)

Industrials30.5
Financials21.6
Materials17.8
Health Care13.1
Information Technology6.0
Consumer Discretionary4.7
Consumer Staples3.1

Source: SVM, as at 30/04/2022

Size Analysis (%)

Mega Cap (>€50bn)4.9
Large Cap (<€50bn)25.5
Mid Cap (<€10bn)36.6
Small Cap (<€1bn)29.8

Source: SVM, as at 30/04/2022

Geographic Analysis (%)

UK62.2
Ireland16.9
France14.4
Germany2.6
Sweden0.7

Source: SVM, as at 30/04/2022

Currency Exposure (%)

Euro33.9
Sterling62.2
Swedish Krona0.7

Source: SVM, as at 30/04/2022

Show piebar chart

This Month's Featured Stock

Norcros

Norcros, a market leading supplier of bathroom and kitchen products, announced an encouraging trading update ahead of the company’s full year preliminary results for the year ended 31st March 2022. While market conditions have remained challenging, with continued supply chain constraints and strong cost inflation, the group has still delivered double digit revenue growth and a record level of operating profit. With net cash on the balance sheet, the company’s strong financial position has allowed for a build in inventories in order to ensure continued stock availability for customers. Where smaller competitors have been less able to cope with these supply chain issues Norcros has taken market share contributing to the strong top-line development and resulting in revenues 20.8% above pre-pandemic levels.

The company’s strong position is further bolstered by the broad and innovative range of products built over the years through a series of acquisitions. Operating as a holding company, the listed entity provides central functions to the operating units. It is this diversified structure that has formed the basis of our engagement activities with Norcros. As long-term shareholders we have encouraged the development of better recognition of ESG issues within the company and there has been a marked increase in availability of commentary and data within the company’s literature. But there is still a lack of universal, standardised reporting across all the operating companies which makes a truly comprehensive analysis difficult. We have been promised more improvements in the upcoming annual report and look forward to its publication in June to assess the progress being made

Performance

Performance (%)

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FundIndex
1 month0.1-1.0
2022 YTD-11.0-5.6
1 year-4.03.5
3 years22.621.9
5 years31.635.1
Since launch*291.6161.2
Source: Lipper, as at 30/04/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
20221.29.1-7.9
202158.930.9+28.0
2020-17.7-10.6-7.1
2019-4.74.3-9.0
20189.62.6+7.0
Source: Lipper, as at 31/03/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
330.20p
0.15%
Class B
371.30p
0.11%

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

Source: State Street, as at 16/05/2022.

Commentary

Investor confidence is low and financial markets are characterised by considerable uncertainty. Aggressive rhetoric from the Federal Reserve on the path of US interest rates pushed the dollar higher and undermined growth stocks. Elsewhere, equity market weakness was less pronounced as local currencies absorbed some of the pressure. In contrast to the Federal Reserve, which is faced with a particularly acute labour market problem, other central banks are tightening less aggressively. ECB. The fund returned 0.1% versus the MSCI Europe Index that delivered -1.0%.

The bear case for equities is straightforward: inflation is rocketing; growth forecasts have been downgraded; central banks are behind the curve; and valuations are high relative to history. We are mindful that at times of stress optimism is seen as naïve at best or at worst cynical and self-serving. We do believe, though, that there are reasons to be positive. Equity markets function as a discounting mechanism and financial conditions have already tightened considerably. Growth may slow further but we feel this is more likely to be a growth ‘wobble’ than a full-blown recession. We might be wrong, of course, but many cyclical stocks have already endured significant corrections and are trading at attractive valuations. Interestingly, some consumer businesses, have seen their shares initially sell-off on earnings disappointments but quickly recover and trade back to previous levels. At the risk of stating the blindingly obvious, in such an environment stock-picking is key.

With interest rates moving higher the investing backdrop continues to evolve. Most significantly, valuation is relevant again. In an environment of extremely loose monetary policy narrative has often trumped everything else, but with liquidity tightening greater importance is attached to the fundamentals. Highly rated growth companies may enjoy a sharp bounce as we reach the peak in interest rate expectations, but as markets normalise we expect the divergence in valuations to be considerably lower than has recently been the case.

Alpha Financial Management rose sharply as its trading update revealed that current trading was ‘significantly ahead of current market expectations’. The group commented that high client demand across all its major geographies and verticals had delivered strong double-digit organic revenue growth and further margin improvement. Calnex Solutions gained as the company released a further positive trading update. Not only will results come in ahead of expectations, but the order book is at record levels. With strong demand for its products and a nascent opportunity in the data centre market, the outlook remains very positive. Dalata jumped as REVPAR recovered to above 2019 levels. Smith & Nephew bounced as revenue growth was ahead of the market’s expectations. While there are legitimate concerns over whether the company has sufficient scale to compete with larger US competitors, we feel growth will rebound as economies open up and the rate of elective surgeries accelerate.

Sedana Medical declined sharply for little fundamental reason. The number of ventilated patients declined but the company continues to hit all its key milestones. Prudential underperformed as investors fretted over the impact further Chinese lockdowns would have on the group’s sales activity.

The weakness in cyclical stocks was used to take a new unit in IMI.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 30/04/2022.

Investor confidence is low and financial markets are characterised by considerable uncertainty. Aggressive rhetoric from the Federal Reserve on the path of US interest rates pushed the dollar higher and undermined growth stocks. Elsewhere, equity market weakness was less pronounced as local currencies absorbed some of the pressure. In contrast to the Federal Reserve, which is faced with a particularly acute labour market problem, other central banks are tightening less aggressively. ECB. The fund returned 0.1% versus the MSCI Europe Index that delivered -1.0%.

The bear case for equities is straightforward: inflation is rocketing; growth forecasts have been downgraded; central banks are behind the curve; and valuations are high relative to history. We are mindful that at times of stress optimism is seen as naïve at best or at worst cynical and self-serving. We do believe, though, that there are reasons to be positive. Equity markets function as a discounting mechanism and financial conditions have already tightened considerably. Growth may slow further but we feel this is more likely to be a growth ‘wobble’ than a full-blown recession. We might be wrong, of course, but many cyclical stocks have already endured significant corrections and are trading at attractive valuations. Interestingly, some consumer businesses, have seen their shares initially sell-off on earnings disappointments but quickly recover and trade back to previous levels. At the risk of stating the blindingly obvious, in such an environment stock-picking is key.

With interest rates moving higher the investing backdrop continues to evolve. Most significantly, valuation is relevant again. In an environment of extremely loose monetary policy narrative has often trumped everything else, but with liquidity tightening greater importance is attached to the fundamentals. Highly rated growth companies may enjoy a sharp bounce as we reach the peak in interest rate expectations, but as markets normalise we expect the divergence in valuations to be considerably lower than has recently been the case.

Alpha Financial Management rose sharply as its trading update revealed that current trading was ‘significantly ahead of current market expectations’. The group commented that high client demand across all its major geographies and verticals had delivered strong double-digit organic revenue growth and further margin improvement. Calnex Solutions gained as the company released a further positive trading update. Not only will results come in ahead of expectations, but the order book is at record levels. With strong demand for its products and a nascent opportunity in the data centre market, the outlook remains very positive. Dalata jumped as REVPAR recovered to above 2019 levels. Smith & Nephew bounced as revenue growth was ahead of the market’s expectations. While there are legitimate concerns over whether the company has sufficient scale to compete with larger US competitors, we feel growth will rebound as economies open up and the rate of elective surgeries accelerate.

Sedana Medical declined sharply for little fundamental reason. The number of ventilated patients declined but the company continues to hit all its key milestones. Prudential underperformed as investors fretted over the impact further Chinese lockdowns would have on the group’s sales activity.

The weakness in cyclical stocks was used to take a new unit in IMI.

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 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.

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0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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