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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£18.9m

Data as at 31/01/2021.

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.

Smurfit Kappa Group6.0
Synthomer5.9
Forterra4.6
Alpha FMC4.2
CRH3.7
Prudential4.3
OSB Group3.8
Allianz3.5
Lloyds Banking Group 3.3
AXA3.0
Uniphar5.3
DCC4.1
Roche Holdings3.9
AstraZeneca 3.6
Norcros5.2
Tesco 4.5
Jost Werke3.0
Vistry Group2.2
Creo Medical Group3.8
Koninklijke Philips2.4
Barco1.6

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

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 (%)

Smurfit Kappa Group6.0
Synthomer5.9
Uniphar5.3
Norcros5.2
Forterra4.6
Tesco 4.5
Prudential4.3
Alpha FMC4.2
DCC4.1
Roche Holdings3.9
Rest of Portfolio52.3

Source: SVM, as at 31/01/2021

Sector Exposure (%)

Industrials40.8
Financials17.9
Health Care13.6
Consumer Services9.7
Consumer Goods8.4
Basic Materials5.9
Technology2.5

Source: SVM, as at 31/01/2021

Size Analysis (%)

Mega Cap (>€50bn)10.9
Large Cap (<€50bn)23.6
Mid Cap (<€10bn)35.7
Small Cap (<€1bn)28.6

Source: SVM, as at 31/01/2021

Geographic Analysis (%)

UK58.9
Ireland11.2
France9.1
Germany8.3
Switzerland3.9
Sweden3.6
Netherlands2.4
Belgium1.6

Source: SVM, as at 31/01/2021

Currency Exposure (%)

Euro36.2
Sterling55.2
Swiss Franc3.9
Swedish Krona3.6

Source: SVM, as at 31/01/2021

Show piebar chart

This Month's Featured Stock

Volution Group plc

Companies deemed sustainable by virtue of the product or service they sell are still subject to SVM’s rigorous ESG analysis and engagement process to ensure the manner in which these goods and services are produced and delivered matches the ESG credentials of their underlying offering. A good example of this approach is the research and engagement we have had with Volution Group plc. The sustainability of the company’s products is encouraging as their airflow systems are intrinsically designed to reduce emissions helping, as the company states, to support the net-zero ambitions of the countries in which they operate. But despite this lofty statement there is still room for considerable improvement.

We are pressing the company to disclose more data on their own emissions derived from the manufacturing process, as opposed to those of the products in isolation. Such improved disclosure will contribute to a proper assessment of the total product life-cycle environmental impact of the company’s finished goods. Questions have also been asked regarding the company’s target to reduce the use of plastics in production process which notably only applies to their own production not that of suppliers. Again, more disclosure on total production rather than simply in-house will give a more holistic base from which concerned investors can seek improvements.

Volution’s product portfolio is clearly contributing toward overall global emissions reduction, but, with some further action, it is clear that the good can get even better both in terms of the environment but also the attractiveness of our investment.

Performance

Performance (%)

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FundIndex
1 month-0.9-1.9
2021 YTD-0.9-1.9
1 year3.52.8
3 years5.39.5
5 years46.055.9
Since launch*245.5129.9
Source: Lipper, as at 31/01/2021, 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
330.20p
-0.33%
Class B
367.90p
-0.35%

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

Source: State Street, as at 05/03/2021.

Commentary

Equity markets gained over the first part of the month only for virus concerns to re-emerge. Slower than anticipated vaccine rollouts and unease over new mutations of the virus led to a pull-back. Markets were rattled further by aggressive retail-led short squeezes in a number of heavily shorted US stocks which raised fears over the viability of a small number of hedge funds. This ‘gammafication’ of markets is unhealthy, impedes price discovery, and highlights the misallocation of capital created by QE. It should be noted that this does not pose a systematic risk and will not be the catalyst for a material correction. High absolute valuations in certain market segments, however, may lead to volatility. The fund returned -0.9% versus the MSCI Europe TR Index that returned -1.9%.

Despite stretched valuations we remain fundamentally constructive on the outlook. Outside the risk of a vaccine-evading mutation, the biggest risk to markets is the premature tightening of policy. In this regard policymakers have generally been at pains to emphasise that they are prepared to let the economy run ‘hot’ rather than risk choking off the recovery. Such a policy is eminently sensible when long-term interest rates are exceptionally low and the global economy is characterised by large output gaps. President Biden’s proposed $1.9 trillion stimulus plan – equivalent to 9% of GDP – epitomises this thinking. Fiscal stimulus is less explicit in the UK, but the Chancellor has indicated his desire to make any fiscal tightening back-end loaded. In Europe, however, the debate appears less clear-cut. German fiscal conservatives pushed back on suggestions by Helge Braun, a close aide of Angela Merkel, that the ‘debt brake’ enshrined in the constitution be formally suspended for longer than is currently envisaged.

Alpha Financial Consulting rose on little newsflow. The company is hosting a capital markets day at the end of the month that will highlight the core drivers for growth within the North American business and the insurance client segment. These both offer a significant market opportunity for the group and are key drivers of its long-term growth. Despite the recent appreciation in the shares, we think there is material upside as the company begins to leverage its international footprint. RWS gained as some of the ‘technical’ selling that had weighed on the stock since its merger with SDL abated. The execution risks associated with the merger should not be underestimated, but equally the potential upside is significant if management can harness the value of SDL’s technology with RWS’s client relationships.

Prudential fell as it revealed that it would no longer IPO its US subsidiary, Jackson Life, but instead would spin it off. Consequently, Prudential will now not receive a dividend from Jackson and will need to raise a small amount of capital to fund its Asian growth ambitions. If this were to be via a listing in Hong Kong or elsewhere in Asia it would facilitate easier comparisons with AIA, its main peer. Financial stocks Allianz and Lloyds, as well as aviation services provider, Menzies, declined as concerns over the pace of vaccinations and the emergence of new, potentially more dangerous, virus variants led to nervousness around the speed of the economic recovery.

Trading was limited.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/01/2021.

Equity markets gained over the first part of the month only for virus concerns to re-emerge. Slower than anticipated vaccine rollouts and unease over new mutations of the virus led to a pull-back. Markets were rattled further by aggressive retail-led short squeezes in a number of heavily shorted US stocks which raised fears over the viability of a small number of hedge funds. This ‘gammafication’ of markets is unhealthy, impedes price discovery, and highlights the misallocation of capital created by QE. It should be noted that this does not pose a systematic risk and will not be the catalyst for a material correction. High absolute valuations in certain market segments, however, may lead to volatility. The fund returned -0.9% versus the MSCI Europe TR Index that returned -1.9%.

Despite stretched valuations we remain fundamentally constructive on the outlook. Outside the risk of a vaccine-evading mutation, the biggest risk to markets is the premature tightening of policy. In this regard policymakers have generally been at pains to emphasise that they are prepared to let the economy run ‘hot’ rather than risk choking off the recovery. Such a policy is eminently sensible when long-term interest rates are exceptionally low and the global economy is characterised by large output gaps. President Biden’s proposed $1.9 trillion stimulus plan – equivalent to 9% of GDP – epitomises this thinking. Fiscal stimulus is less explicit in the UK, but the Chancellor has indicated his desire to make any fiscal tightening back-end loaded. In Europe, however, the debate appears less clear-cut. German fiscal conservatives pushed back on suggestions by Helge Braun, a close aide of Angela Merkel, that the ‘debt brake’ enshrined in the constitution be formally suspended for longer than is currently envisaged.

Alpha Financial Consulting rose on little newsflow. The company is hosting a capital markets day at the end of the month that will highlight the core drivers for growth within the North American business and the insurance client segment. These both offer a significant market opportunity for the group and are key drivers of its long-term growth. Despite the recent appreciation in the shares, we think there is material upside as the company begins to leverage its international footprint. RWS gained as some of the ‘technical’ selling that had weighed on the stock since its merger with SDL abated. The execution risks associated with the merger should not be underestimated, but equally the potential upside is significant if management can harness the value of SDL’s technology with RWS’s client relationships.

Prudential fell as it revealed that it would no longer IPO its US subsidiary, Jackson Life, but instead would spin it off. Consequently, Prudential will now not receive a dividend from Jackson and will need to raise a small amount of capital to fund its Asian growth ambitions. If this were to be via a listing in Hong Kong or elsewhere in Asia it would facilitate easier comparisons with AIA, its main peer. Financial stocks Allianz and Lloyds, as well as aviation services provider, Menzies, declined as concerns over the pace of vaccinations and the emergence of new, potentially more dangerous, virus variants led to nervousness around the speed of the economic recovery.

Trading 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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