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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.

Fund Details

Launch Date31 October 2006
BenchmarkMSCI Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£20.7m

Data as at 30/06/2021.

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.

Alpha FMC5.9
Smurfit Kappa Group5.5
Rexel5.5
Synthomer5.5
CRH4.1
Prudential4.6
Lloyds Banking Group 4.2
AXA4.0
OSB Group4.0
Allianz3.5
Norcros7.3
Jost Werke3.2
Tesco 2.1
Nordic Entertainment Group1.7
Uniphar6.2
DCC2.9
Roche Holdings2.6
Creo Medical Group3.3
Koninklijke Philips1.9
ActiveOps1.2

There are no holdings in this category

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 IA sector.

Top 10 Holdings (%)

Norcros7.3
Uniphar6.2
Alpha FMC5.9
Smurfit Kappa Group5.5
Rexel5.5
Synthomer5.5
Prudential4.6
Lloyds Banking Group 4.2
CRH4.1
AXA4.0
Rest of Portfolio47.3

Source: SVM, as at 30/06/2021

Sector Exposure (%)

Industrials28.9
Materials20.8
Financials20.2
Health Care14.1
Information Technology4.2
Consumer Discretionary3.5
Consumer Staples2.1
Communication Services1.7

Source: SVM, as at 30/06/2021

Size Analysis (%)

Mega Cap (>€50bn)6.1
Large Cap (<€50bn)29.5
Mid Cap (<€10bn)27.1
Small Cap (<€1bn)32.9

Source: SVM, as at 30/06/2021

Geographic Analysis (%)

UK56.3
France12.5
Ireland11.7
Germany8.7
Switzerland2.6
Netherlands1.9
Sweden1.7

Source: SVM, as at 30/06/2021

Currency Exposure (%)

Euro38.9
Sterling52.3
Swiss Franc2.6
Swedish Krona1.7

Source: SVM, as at 30/06/2021

Show piebar chart

This Month's Featured Stock

Norcros

Norcros is a UK listed supplier of kitchen and bathroom products for both commercial and domestic settings. The company operates under a number of brand names including Triton, Vado and Johnson Tiles. The key markets for the group are the UK, Ireland and South Africa as well as some other export countries. The focus is on both the new build segment and the repair and maintenance aftermarket. Norcros operates an integrated business model encompassing production right through to retail ensuring all segments of the value chain are addressed.

The company’s decentralised nature, where subsidiaries are given operating independence, makes an overall ESG assessment both time consuming and difficult, even giving a potentially inaccurate picture of the credentials of the listed entity in which we have a shareholding. Consequently, we have been asking the company to improve its overall ESG disclosure at the group level in order to allow a more accurate assessment of the standards being reached and any progress being made.

We are pleased to report considerable improvement on this front. As the key outlet for the information we require, the company’s annual report and accounts now includes 3 times the ESG commentary seen in previous years’ reports. Perhaps more importantly, and for the first time ever, the company has also included ESG in the “Principal Risks” section of the 2021 Annual Report. This is a great move forward as it means that environmental, societal and governance factors are now a strategic focus for both senior management and the supervisory board. We welcome this development and look forward to further progress from Norcros over the coming years.

Performance

Performance (%)

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FundIndex
1 month-1.31.5
2021 YTD19.611.1
1 year41.121.5
3 years28.424.7
5 years78.262.9
Since launch*317.0160.3
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
202141.121.5+19.6
2020-6.2-3.5-2.7
2019-3.06.4-9.4
20187.34.2+3.1
201729.325.4+3.9
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
382.50p
-0.55%
Class B
427.70p
-0.53%

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

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

Commentary

Equities traded sideways in June. The yield curve continued to flatten, especially in the immediate aftermath of this month’s meeting of the Federal Reserve. Beneath the surface both defensive and growth stocks traded much better as investors fretted over the impact of the Delta Covid variant. The variant, which first originated in India, is now the dominant strain in many countries including the UK. While there is little sign that Delta causes more serious illness, it is clearly more transmissible and has brought into the question the speed of re-openings. The fund returned -1.3% versus the MSCI Europe Index that delivered +1.5%.

Despite the flattening of the yield curve, we think it is premature to anticipate the end of the cycle. Fiscal and monetary policy remain extremely supportive and much of the world has still to fully open-up. In those countries where vaccinations, and therefore re-opening, are furthest advanced, economies are robust. US house price growth accelerated at its fastest pace in over 30 years for the second month in a row with strong demand and a shortage of supply leading to prices increasing 14.6% year on year. In the UK, the June Nationwide house price index rose 13.4%. In both countries ‘survey’ measures of economic activity are strong across the board.

For the first time in many years the political consensus is very much in favour of fiscal stimulus. The political wrangling over President Biden’s infrastructure bill continues but it is highly unlikely that the US will fall short in stimulating the economy. In Europe, the German finance minister, Olaf Scholz, dismissed suggestions that German and EU fiscal rules should be tightened. Strong economic growth, stimulative policy, and low real interest rates continue to fuel debate over the inflation outlook. Substantially tighter monetary policy remains the biggest risk for asset markets but looks unlikely in the short-term. After a period of consolidation, we expect equities to move higher in the second half.

Roche gained as the unexpected US approval for Biogen’s Aduhelm drug for the treatment of Alzheimer’s increased interest in the potential for Roche’s Gantenerumab product. The two drugs have the same mechanism of action and the upcoming results of Gantenerumab’s Phase 3 trial should provide further insight. The market opportunity is significant as Alzheimer’s patients are woefully underserved by current drug treatments. Rexel delivered a first-half trading update that indicated same day sales growth of 19% year on year. Admittedly this was against depressed pandemic activity, but nonetheless demonstrates the strength of the group’s proposition. The company now expects full year sales of growth of 12-15% versus original expectations of 5-7%. Norcros, the fund’s largest holding, is another company that has had a good crisis. It released full-year results that were in-line with recently upgraded guidance but indicated that the current year had started strongly. The shares have had a good run but continue to trade on an undemanding multiple. A net cash balance sheet leaves scope for further upside to earnings from acquisitions. Capgemini gained as technology stocks were back in favour.

There were no significant disappointments. The fund’s financial stocks generally underperformed as bonds rallied and the yield curve flattened.

Trading activity was limited.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 30/06/2021.

Equities traded sideways in June. The yield curve continued to flatten, especially in the immediate aftermath of this month’s meeting of the Federal Reserve. Beneath the surface both defensive and growth stocks traded much better as investors fretted over the impact of the Delta Covid variant. The variant, which first originated in India, is now the dominant strain in many countries including the UK. While there is little sign that Delta causes more serious illness, it is clearly more transmissible and has brought into the question the speed of re-openings. The fund returned -1.3% versus the MSCI Europe Index that delivered +1.5%.

Despite the flattening of the yield curve, we think it is premature to anticipate the end of the cycle. Fiscal and monetary policy remain extremely supportive and much of the world has still to fully open-up. In those countries where vaccinations, and therefore re-opening, are furthest advanced, economies are robust. US house price growth accelerated at its fastest pace in over 30 years for the second month in a row with strong demand and a shortage of supply leading to prices increasing 14.6% year on year. In the UK, the June Nationwide house price index rose 13.4%. In both countries ‘survey’ measures of economic activity are strong across the board.

For the first time in many years the political consensus is very much in favour of fiscal stimulus. The political wrangling over President Biden’s infrastructure bill continues but it is highly unlikely that the US will fall short in stimulating the economy. In Europe, the German finance minister, Olaf Scholz, dismissed suggestions that German and EU fiscal rules should be tightened. Strong economic growth, stimulative policy, and low real interest rates continue to fuel debate over the inflation outlook. Substantially tighter monetary policy remains the biggest risk for asset markets but looks unlikely in the short-term. After a period of consolidation, we expect equities to move higher in the second half.

Roche gained as the unexpected US approval for Biogen’s Aduhelm drug for the treatment of Alzheimer’s increased interest in the potential for Roche’s Gantenerumab product. The two drugs have the same mechanism of action and the upcoming results of Gantenerumab’s Phase 3 trial should provide further insight. The market opportunity is significant as Alzheimer’s patients are woefully underserved by current drug treatments. Rexel delivered a first-half trading update that indicated same day sales growth of 19% year on year. Admittedly this was against depressed pandemic activity, but nonetheless demonstrates the strength of the group’s proposition. The company now expects full year sales of growth of 12-15% versus original expectations of 5-7%. Norcros, the fund’s largest holding, is another company that has had a good crisis. It released full-year results that were in-line with recently upgraded guidance but indicated that the current year had started strongly. The shares have had a good run but continue to trade on an undemanding multiple. A net cash balance sheet leaves scope for further upside to earnings from acquisitions. Capgemini gained as technology stocks were back in favour.

There were no significant disappointments. The fund’s financial stocks generally underperformed as bonds rallied and the yield curve flattened.

Trading activity was limited.

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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