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SVM World Equity Fund

SVM World Equity Fund

Unwavering focus on risk/reward

The fund, managed by Neil Veitch, aims to achieve long term growth by investing in businesses worldwide where Neil believes the current valuation offers an opportunity. His valuation driven approach ensures he finds the right businesses to invest in, at the right price and also knows the right time to sell.

SVM World Equity Fund

Unwavering focus on risk/reward

The fund, managed by Neil Veitch, aims to achieve long term growth by investing in businesses worldwide where Neil believes the current valuation offers an opportunity. His valuation driven approach ensures he finds the right businesses to invest in, at the right price and also knows the right time to sell.

Overview

Fund Objective

The Fund's aim is to provide medium to long term capital growth by investing in companies globally. It aims to outperform its peers in the IA Global Sector.

Approach

With a vast array of companies to choose from, successful investing in global equities depends on a good understanding of what makes a good investment. We aim to find strong companies that we can buy at an attractive price.

We focus on the factors that will move companies’ share price such as sales patterns, margins and cash flow. However, we do not simply invest for growth – nor for current value. We invest on the basis of the value of growth. We want to find strong companies for your portfolio whose future growth is not reflected in current market expectations. We believe these companies have an attractive positive bias in their risk-reward profile which makes them potentially rewarding investments in your portfolio.

Investing in this fund, you will be buying a concentrated portfolio of companies of any size with strong, undervalued long-term prospects. You can invest with confidence in our ability to find these companies, based on our long history of comprehensive company analysis and financial modelling, and our understanding of what’s changing in companies and their industries.

Fund Details

Launch Date1 December 2010
IA SectorGlobal
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£12.6m

Data as at 31/10/2020.

Fund Manager

Neil Veitch
Global & UK Investment Director
14
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

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.

Alphabet10.2
Microsoft9.2
SK Hynix4.5
Synthomer5.3
Hitachi4.1
Denka3.8
Visa8.1
GVC Holdings 5.3
Ryanair 3.8
Uniphar4.5
Roche Holdings3.9
Jadestone Energy2.5
Energean1.9
Savannah Energy0.5
Prudential3.2

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 World Equity Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IA sector.

Top 10 Holdings (%)

Alphabet10.2
Microsoft9.2
Visa8.1
GVC Holdings 5.3
Synthomer5.3
Uniphar4.5
SK Hynix4.5
Micron Technology4.4
MagnaChip Semiconductor4.2
Hitachi4.1
Rest of Portfolio40.1

Source: SVM, as at 31/10/2020

Sector Exposure (%)

Technology32.5
Consumer Services13.7
Industrials11.9
Financials11.3
Basic Materials9.1
Health Care8.0
Consumer Goods5.0
Oil & Gas4.9

Source: SVM, as at 31/10/2020

Size Analysis (%)

Mega Cap (>£50bn)31.4
Large Cap (<£50bn)22.1
Mid Cap (<£10bn)21.3
Small Cap (<£1bn)21.5

Source: SVM, as at 31/10/2020

Geographic Analysis (%)

North America37.2
United Kingdom33.2
Europe (excluding UK)12.3
Asia Pacific (excluding Japan)5.6
Japan8.0

Source: SVM, as at 31/10/2020

Currency Exposure (%)

Euro10.4
Sterling31.8
Europe non-Euro3.9
US Dollar40.5
Japanese Yen8.0
Others5.6

Source: SVM, as at 31/10/2020

Show piebar chart

This Month's Featured Stock

Alphabet

Alphabet is the parent company of Google and many other technology subsidiaries including DeepMind (artificial intelligence) and Waymo (autonomous driving). October was a turbulent month for Alphabet. The US Department of Justice started an antitrust case against the company, accusing the company of acting as a ‘monopoly gatekeeper for the Internet’. One week later, the company announced Q3 results that were significantly ahead of market expectations and showed a sharp rebound in advertising and search revenue as well as strong growth in YouTube and Play subscriptions.

While the antitrust accusations need to be taken seriously, we do not think they will have a long-term negative impact on Alphabet. These cases tend to take a long time to reach conclusion and there are no proposals to push for a break-up of the company. For perspective, Microsoft’s antitrust case lasted 10 years and the stock gained around 900% over the period. We also think that Google’s core search product is hard to target – it is free to use, is highly popular, and has numerous competitors.

Instead, investors should focus on the continued strength of Alphabet’s financial and operational performance. The company has averaged over 20% organic revenue growth for over a decade and should be able to sustain double-digit growth over the medium to long-term. Management plan to provide more granularity about the performance of its cloud business, where the company is targeting a sizable market opportunity with its Data Analytics products. With over $120bn cash on its balance sheet, there is ample dry powder if the company found a suitable acquisition target. Trading on an estimated 2021 PE of 22x, a discount to many global technology peers, we believe that the current valuation does not reflect Alphabet’s world-leading strength.

Performance

Performance (%)

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FundIndex
1 month-1.7-2.0
2020 YTD-2.43.4
1 year8.17.5
3 years11.721.3
5 years56.070.3
Since launch*149.5153.7
Source: Lipper, as at 31/10/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
20209.97.4+2.5
2019-2.56.2-8.7
201810.912.3-1.4
201719.215.0+4.2
201620.427.7-7.3
Source: Lipper, as at 31/10/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
363.40p
0.61%
Class B
406.20p
0.62%

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

Source: State Street, as at 27/11/2020.

Commentary

Equity markets delivered their worst monthly returns since March as the prospect of further lockdowns spooked investors. As has been the case throughout 2020, the disease outlook remains the key variable for markets. Rising infections and increasing hospitalisations led many European countries to tighten lockdown restrictions. Heightened risk aversion due to the Covid situation was exacerbated further by the impending US election. The fund returned -1.7% versus the average fund that declined -2.0%.

November’s US Presidential election loomed large in investors’ minds as both candidates made their final appeal to the nation. Despite the drama of President Trump catching Covid, Supreme Court nominations, and the final debate, there was little evidence that much has changed in the race. Challenger Joe Biden’s polling lead held steady and he remains favourite to win the election. Predicting the initial market reaction is trickier than usual. A comprehensive Biden victory would likely lead to fears of higher taxes and increased regulation, but in this case many will welcome the prospect of a more predictable Presidency. In the long-run, though, history tells us that markets are relatively agnostic to the party affiliation of the resident of the White House.

A number of European countries announced the reinstatement of nationwide lockdowns to combat the steady increase in infection. While less restrictive than the lockdowns earlier in the year, they will nonetheless have a significant impact on economic activity. Investors’ initial reactions, however, appear to be to largely look through the short-term economic impact and focus on the prospect of a successful vaccine and economic recovery in 2021. Should there be any material slippage in the timeline for a vaccine markets will respond negatively.

With the mid-November deadline for trade talks between the UK and EU fast approaching, both sides talked positively about the prospects of a deal. The reduced likelihood of a ‘no deal’ outcome initially led to a rebound in sterling although this petered out as risk assets came under pressure later in the month.

Alphabet was the largest positive contributor to performance. The shares climbed higher as third quarter results were significantly ahead of market expectations and showed a sharp rebound in advertising and search revenue as well as strong growth in YouTube and Play subscriptions. Synthomer shares rose strongly as the group’s trading update highlighted that profits were ahead of expectations. While all divisions contributed positively, the group’s nitrile business, a producer of the polymer used in the manufacture of latex gloves, enjoyed particularly robust trading on the back of the Covid pandemic. While demand may reduce slightly from current levels, the pandemic has likely encouraged a longer lasting change in consumer behaviour that will support future growth. The improved trading performance has fed through into higher cash generation and lower debt, enhancing the prospect of further M&A activity. Shares in Norcros gained as the manufacturer and supplier of bathroom accessories and materials announced that sales and profitability had rebounded sharply and would now be ahead of analyst’s expectations. A sharp focus on controlling costs and preserving cash led to a significant reduction in debt and the group now expects gearing to be down to 0.2x at the half year. This leaves the business on a very sound footing for when demand fully recovers. TI Fluid gained as sentiment towards the automotive sector improved as demand remained robust.

Visa shares fell as results from peer, Mastercard, indicated weaker trends in cross-border revenue. Unsurprisingly, intra-Europe volumes were particularly weak. Despite lower volumes in the short-term, we believe the pandemic has accelerated the shift towards a ‘cashless’ society and the card networks are a significant beneficiary. Jadestone Energy declined as the oil price fell as governments reinstated lockdown measures. Prudential Plc came under pressure as the economic outlook deteriorated.

There was limited trading activity.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 31/10/2020.

Equity markets delivered their worst monthly returns since March as the prospect of further lockdowns spooked investors. As has been the case throughout 2020, the disease outlook remains the key variable for markets. Rising infections and increasing hospitalisations led many European countries to tighten lockdown restrictions. Heightened risk aversion due to the Covid situation was exacerbated further by the impending US election. The fund returned -1.7% versus the average fund that declined -2.0%.

November’s US Presidential election loomed large in investors’ minds as both candidates made their final appeal to the nation. Despite the drama of President Trump catching Covid, Supreme Court nominations, and the final debate, there was little evidence that much has changed in the race. Challenger Joe Biden’s polling lead held steady and he remains favourite to win the election. Predicting the initial market reaction is trickier than usual. A comprehensive Biden victory would likely lead to fears of higher taxes and increased regulation, but in this case many will welcome the prospect of a more predictable Presidency. In the long-run, though, history tells us that markets are relatively agnostic to the party affiliation of the resident of the White House.

A number of European countries announced the reinstatement of nationwide lockdowns to combat the steady increase in infection. While less restrictive than the lockdowns earlier in the year, they will nonetheless have a significant impact on economic activity. Investors’ initial reactions, however, appear to be to largely look through the short-term economic impact and focus on the prospect of a successful vaccine and economic recovery in 2021. Should there be any material slippage in the timeline for a vaccine markets will respond negatively.

With the mid-November deadline for trade talks between the UK and EU fast approaching, both sides talked positively about the prospects of a deal. The reduced likelihood of a ‘no deal’ outcome initially led to a rebound in sterling although this petered out as risk assets came under pressure later in the month.

Alphabet was the largest positive contributor to performance. The shares climbed higher as third quarter results were significantly ahead of market expectations and showed a sharp rebound in advertising and search revenue as well as strong growth in YouTube and Play subscriptions. Synthomer shares rose strongly as the group’s trading update highlighted that profits were ahead of expectations. While all divisions contributed positively, the group’s nitrile business, a producer of the polymer used in the manufacture of latex gloves, enjoyed particularly robust trading on the back of the Covid pandemic. While demand may reduce slightly from current levels, the pandemic has likely encouraged a longer lasting change in consumer behaviour that will support future growth. The improved trading performance has fed through into higher cash generation and lower debt, enhancing the prospect of further M&A activity. Shares in Norcros gained as the manufacturer and supplier of bathroom accessories and materials announced that sales and profitability had rebounded sharply and would now be ahead of analyst’s expectations. A sharp focus on controlling costs and preserving cash led to a significant reduction in debt and the group now expects gearing to be down to 0.2x at the half year. This leaves the business on a very sound footing for when demand fully recovers. TI Fluid gained as sentiment towards the automotive sector improved as demand remained robust.

Visa shares fell as results from peer, Mastercard, indicated weaker trends in cross-border revenue. Unsurprisingly, intra-Europe volumes were particularly weak. Despite lower volumes in the short-term, we believe the pandemic has accelerated the shift towards a ‘cashless’ society and the card networks are a significant beneficiary. Jadestone Energy declined as the oil price fell as governments reinstated lockdown measures. Prudential Plc came under pressure as the economic outlook deteriorated.

There was limited trading activity.

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 International Financial Data Services (IFDS Group) 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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