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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£15.7m

Data as at 31/07/2022.

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 FMC9.0
Smurfit Kappa Group5.5
CRH4.6
Capgemini4.4
Forterra4.4
OSB Group5.6
Lloyds Banking Group 4.8
AXA4.8
Prudential4.4
Legal & General2.9
Norcros6.8
Tesco 3.3
Jost Werke2.5
Dalata Hotel Group2.3
Marks & Spencer2.0
Uniphar4.1
DCC3.4
Roche Holdings3.1
Smith & Nephew2.3
Sedana Medical0.6
Creo Medical Group2.2
LungLife AI1.8
Calnex Solutions1.2
ActiveOps0.7

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 FMC9.0
Norcros6.8
OSB Group5.6
Smurfit Kappa Group5.5
Lloyds Banking Group 4.8
AXA4.8
CRH4.6
Capgemini4.4
Forterra4.4
Prudential4.4
Rest of Portfolio45.7

Source: SVM, as at 31/07/2022

Sector Exposure (%)

Industrials25.1
Financials22.5
Materials18.4
Health Care14.7
Information Technology6.3
Consumer Staples5.3
Consumer Discretionary4.9

Source: SVM, as at 31/07/2022

Size Analysis (%)

Mega Cap (>€50bn)3.1
Large Cap (<€50bn)29.2
Mid Cap (<€10bn)28.6
Small Cap (<€1bn)36.1

Source: SVM, as at 31/07/2022

Geographic Analysis (%)

UK64.6
Ireland16.5
France9.2
Switzerland3.1
Germany3.1
Sweden0.6

Source: SVM, as at 31/07/2022

Currency Exposure (%)

Euro28.8
Sterling64.6
Swiss Franc3.1
Swedish Krona0.6

Source: SVM, as at 31/07/2022

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This Month's Featured Stock

Marks & Spencer

Marks and Spencer (M&S), one of the UK’s most venerable brands, is a retailer of food and clothing. The group operates over 1,000 stores in the UK and has a mixture of owned and franchised stores in over 60 international markets.

There has been much change at M&S of late with an improvement and rationalisation of the Clothing & Home offering helping to improve customer perception, while the addition of selected third-party brands to the food division has enhanced the customer experience. The company also continues to make headway in reshaping its legacy store estate, although it still has some way to go in shrinking from 247 full-line stores to the targeted 180.

What has remained consistent over the years is the M&S strategy toward ESG issues. The company was the first major retailer to banish the use of free plastic bags, long before the issue was legislated against, and their commitment to carbon reduction is longstanding dating back to 2007 with their launch of Plan A. This has developed over time and now includes a target to reduce not only scope 1 and 2 emissions to zero by 2035 but also across the whole value chain by 2040.

Like all retailers, M&S will face challenges in managing inflationary pressures. We feel, though, that management can still deploy a significant amount of self-help measures to support earnings and that these issues are more than adequately reflected in the current stock price. Currently trading on an estimated March 2023 PE of less than 9x, the revitalisation of the M&S brand fails to be appreciated.

Performance

Performance (%)

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FundIndex
1 month4.74.8
2022 YTD-15.8-7.0
1 year-13.4-2.3
3 years19.313.7
5 years18.426.6
Since launch*270.4157.3
Source: Lipper, as at 31/07/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
2022-15.1-5.6-9.5
202141.121.5+19.6
2020-6.2-3.5-2.7
2019-3.06.4-9.4
20187.34.2+3.1
Source: Lipper, as at 30/06/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
334.30p
1.36%
Class B
376.60p
1.35%

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

Source: State Street, as at 16/08/2022.

Commentary

Equity markets rebounded sharply from their late June lows. A combination of positioning, resilient earnings, and less hawkish commentary from the Federal Reserve post its July meeting drove the rally. The perception that bond yields had peaked led to ‘growth’ outperforming ‘value’. The S&P 500 had its best monthly performance since late 2020, rising 9% and the technology-heavy Nasdaq gained 12%. The fund returned 4.7% versus the MSCI Europe index that rose 4.8%.

The sustainability of July’s rally is open to debate. Investors may well have read too much into the Federal Reserve Chairman, Jerome Powell’s, comments. Indeed, in the aftermath of his speech, several Fed officials sought to downplay the suggestion that the pace of future interest rate rises has slowed. Inflationary pressures remain acute and the Bank of England declared that it forecasts UK inflation peaking at 13% later this year. While markets may have been premature in pricing interest rates cuts in 2023, market-based measures of inflation have stabilised. For the rally to be sustained, however, there needs to be further evidence of inflation subsiding.

Pessimistic commentary from the Bank of England, industrial unrest, and the lacklustre Conservative leadership continue to weigh on sentiment towards UK equities. It might appear that there is little respite in sight but many stocks, particularly those exposed to the domestic economy, are already pricing in significant cuts to earnings. Of course, that doesn’t mean that the shares will react positively to earnings downgrades, but it does present opportunities for the longer-term investor. We continue to selectively add to our consumer and industrial cyclical holdings. We remain overweight in the UK relative to Europe as we believe the current pessimism is overdone and valuations are supportive.

Alpha Financial rose as investor’s continued to digest last month’s full-year results and the implications for the current year. IMI gained as interim results showed further progress in revenues and margins. Each of the group’s businesses have strong positions in structurally growing markets and management remain confident of their 20+% medium-term margin target. Capgemini jumped as interim results came in ahead of expectations and the company raised its outlook for the full year. Organic revenue growth for the first half was 17% driven by broad-based demand for digital transformation. OSB outperformed as investors anticipated a positive impact from higher interest rates on its Net Interest Margin.

Smith & Nephew dropped as interim results disappointed. After a positive start to the year growth slowed in the second quarter and margins were impacted by cost pressures. This resulted in mid-single digit downgrades to earnings forecasts but left investors fearful of a more substantial revision to management’s medium-term financial targets. Creo continued to decline despite further positive operational developments. The recent trading update disclosed that users of its Speedboat Inject tool has more than doubled compared to the previous six months and that it continued to engage with potential strategic investors.

The holding in John Menzies was exited and a new unit taken in M&S.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/07/2022.

Equity markets rebounded sharply from their late June lows. A combination of positioning, resilient earnings, and less hawkish commentary from the Federal Reserve post its July meeting drove the rally. The perception that bond yields had peaked led to ‘growth’ outperforming ‘value’. The S&P 500 had its best monthly performance since late 2020, rising 9% and the technology-heavy Nasdaq gained 12%. The fund returned 4.7% versus the MSCI Europe index that rose 4.8%.

The sustainability of July’s rally is open to debate. Investors may well have read too much into the Federal Reserve Chairman, Jerome Powell’s, comments. Indeed, in the aftermath of his speech, several Fed officials sought to downplay the suggestion that the pace of future interest rate rises has slowed. Inflationary pressures remain acute and the Bank of England declared that it forecasts UK inflation peaking at 13% later this year. While markets may have been premature in pricing interest rates cuts in 2023, market-based measures of inflation have stabilised. For the rally to be sustained, however, there needs to be further evidence of inflation subsiding.

Pessimistic commentary from the Bank of England, industrial unrest, and the lacklustre Conservative leadership continue to weigh on sentiment towards UK equities. It might appear that there is little respite in sight but many stocks, particularly those exposed to the domestic economy, are already pricing in significant cuts to earnings. Of course, that doesn’t mean that the shares will react positively to earnings downgrades, but it does present opportunities for the longer-term investor. We continue to selectively add to our consumer and industrial cyclical holdings. We remain overweight in the UK relative to Europe as we believe the current pessimism is overdone and valuations are supportive.

Alpha Financial rose as investor’s continued to digest last month’s full-year results and the implications for the current year. IMI gained as interim results showed further progress in revenues and margins. Each of the group’s businesses have strong positions in structurally growing markets and management remain confident of their 20+% medium-term margin target. Capgemini jumped as interim results came in ahead of expectations and the company raised its outlook for the full year. Organic revenue growth for the first half was 17% driven by broad-based demand for digital transformation. OSB outperformed as investors anticipated a positive impact from higher interest rates on its Net Interest Margin.

Smith & Nephew dropped as interim results disappointed. After a positive start to the year growth slowed in the second quarter and margins were impacted by cost pressures. This resulted in mid-single digit downgrades to earnings forecasts but left investors fearful of a more substantial revision to management’s medium-term financial targets. Creo continued to decline despite further positive operational developments. The recent trading update disclosed that users of its Speedboat Inject tool has more than doubled compared to the previous six months and that it continued to engage with potential strategic investors.

The holding in John Menzies was exited and a new unit taken in M&S.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

Insights

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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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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