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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£17.2m

Data as at 31/05/2020.

Fund Manager

Neil Veitch
Global & UK Investment Director
14
Years at SVM
23
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.

Alphabet9.0
Microsoft8.3
SK Hynix4.2
Synthomer4.2
Hitachi4.0
CRH3.2
Visa8.3
GVC Holdings 4.0
Ryanair 2.6
Uniphar3.7
Roche Holdings3.3
Merck & Co3.0
Jadestone Energy2.9
Energean1.4
Savannah Energy0.4
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 IMA sector.

Top 10 Holdings (%)

Alphabet9.0
Microsoft8.3
Visa8.3
SK Hynix4.2
Synthomer4.2
Micron Technology4.1
GVC Holdings 4.0
Hitachi4.0
Uniphar3.7
Roche Holdings3.3
Rest of Portfolio47.0

Source: SVM, as at 31/05/2020

Sector Exposure (%)

Oil & Gas4.8
Basic Materials7.2
Industrials12.2
Consumer Goods4.1
Health Care9.3
Consumer Services10.4
Utilities2.7
Financials11.5
Technology30.6

Source: SVM, as at 31/05/2020

Size Analysis (%)

Mega Cap (>£50bn)31.9
Large Cap (<£50bn)26.8
Mid Cap (<£10bn)14.7
Small Cap (<£1bn)19.2

Source: SVM, as at 31/05/2020

Geographic Analysis (%)

North America37.1
United Kingdom31.1
Europe (excluding UK)12.5
Asia Pacific (excluding Japan)5.0
Japan7.0

Source: SVM, as at 31/05/2020

Currency Exposure (%)

Euro12.4
Sterling31.0
Europe non-Euro3.3
US Dollar41.6
Japanese Yen7.0
Others5.0

Source: SVM, as at 31/05/2020

Show piebar chart

This Month's Featured Stock

Capgemini

Capgemini is a leading IT services provider. The company offers consulting services, digital transformation solutions, and technology and engineering services to customers in a broad range of industries worldwide.

The COVID pandemic has emphasised the importance of ensuring operational resilience for all businesses. As working-from-home has become a necessary norm, Capgemini has been well placed to help its customers adapt. Digital and cloud services account for over 50% of group revenues and should benefit both from any short-term demand surge and the acceleration of longer-term trends. While the group does have some exposure to some sectors that will face a greater impact from COVID (e.g auto, travel), much of Capgemini’s revenue comes from longer-term projects designed to reduce costs and increase flexibility. While some work may be pushed to the right, we would expect these revenues to be deferred rather than cancelled.

Capgemini has also recently completed the acquisition of Altran, which had been announced last year. Altran is a global leader in engineering and R&D services, areas where Capgemini was relatively weak. The combined business can now offer both operational technology and information technology solutions in a single platform. This broader product offering should allow Capgemini to both target new customers and grow within existing ones. Although combining two businesses during a pandemic is not ideal, to put it mildly, recent company updates suggest that integration is progressing as planned.

Although near-term earnings are difficult to forecast due to the high levels of uncertainty in the market, we would expect Capgemini’s performance to prove relatively resilient. On a ‘normalised’ basis the group trades at a discount to peers, which we believe is not justified when Capgemini’s digital strengths and opportunities from the Altran deal are taken into consideration.

Performance

Performance (%)

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FundIndex
1 month4.26.0
2020 YTD-5.8-1.7
1 year7.77.7
3 years13.720.3
5 years42.553.2
Since launch*140.7141.3
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
2020-4.4-6.1+1.7
20197.09.2-2.2
20180.23.5-3.3
201728.329.0-0.7
2016-2.8-2.2-0.6
Source: Lipper, as at 31/05/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
324.00p
1.73%
Class B
361.10p
1.72%

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

Source: State Street, as at 03/07/2020.

Commentary

Equities made further gains in May. Markets continue to be acutely sensitive to news flow on the spread of the disease. Confidence is fragile but progress remains positive. Those countries that have relaxed restrictions have yet to see a meaningful second wave. There will, of course, be setbacks along the way but we are more optimistic than we were six to eight weeks ago. Economic data continues to be heavily distorted by the nature of the lockdown. The severity of the slowdown has considerably reduced the utility of much of the higher frequency economic data that investors often use to identify inflection points. Nonetheless, here as well there are some signs of encouragement. The fund rose 4.2% versus the average fund that gained 6.0%.

The most notable feature of returns over the month was the substantial outperformance of ‘growth’ versus ‘value’. As we have commented before this is not a surprise given the current market backdrop. Economic activity has collapsed and central banks have committed to hold interest rates at abnormally low levels for the foreseeable future. Liquidity has exploded with money supply ballooning. This creates almost the perfect backdrop for ‘long duration’ growth stocks. Indeed, many of this year’s strongest performers are companies seeking to benefit from ‘disruptive’ technologies whose economic payback will not be seen for many years. We aren’t averse to ‘growth’, nor oblivious to the risk of an outdated world view, but seek to ensure that any reward is commensurate with the risk taken. In a paradigm characterised by a central bank backstop the extent to which valuation matters, however, is a legitimate debate. The pattern reversed slightly towards the end of the month as some tentative improvements in the economic data began to emerge.

Irish healthcare company, Uniphar, was the largest positive contributor to the fund’s performance. There was nothing specific to explain the rise in the share price but most likely it was a function of increased investor awareness. The company listed last year and has struggled to gain much traction with institutional investors. Maiden full-year results in late March were solid rather than spectacular but served to remind investors of its strong cash generation and growth opportunities. Global cyclicals Visa, TI Fluids, Synthomer and Ryanair performed well. The fund’s energy holdings rose as the oil price continued to recover as demand rebounded. Despite the lockdown we are in active dialogue with our portfolio holdings as well as many other businesses. Considerable uncertainty is the overarching feature of most of these conversations. Relative to expectations at the outset of the crisis, however, the outcome for most companies has been better than anticipated. Business development is challenging but many see the crisis as an opportunity to right-size their operations. This has implications for employment and aggregate final demand, but hopefully will result in a more productive economy over the longer term.

UK building materials company, Norcros, was the largest negative contributor to performance. The stock slumped as investors fretted over the shape of the economic recovery and how quickly construction activity will rebound. Energean was weak as its acquisition of Edison’s E&P business was delayed further.

New positions were initiated in Micron Technology, CRH, JDE Peet and Capgemini. The holding in DCC was exited. The position in Ryanair was increased.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 31/05/2020.

Equities made further gains in May. Markets continue to be acutely sensitive to news flow on the spread of the disease. Confidence is fragile but progress remains positive. Those countries that have relaxed restrictions have yet to see a meaningful second wave. There will, of course, be setbacks along the way but we are more optimistic than we were six to eight weeks ago. Economic data continues to be heavily distorted by the nature of the lockdown. The severity of the slowdown has considerably reduced the utility of much of the higher frequency economic data that investors often use to identify inflection points. Nonetheless, here as well there are some signs of encouragement. The fund rose 4.2% versus the average fund that gained 6.0%.

The most notable feature of returns over the month was the substantial outperformance of ‘growth’ versus ‘value’. As we have commented before this is not a surprise given the current market backdrop. Economic activity has collapsed and central banks have committed to hold interest rates at abnormally low levels for the foreseeable future. Liquidity has exploded with money supply ballooning. This creates almost the perfect backdrop for ‘long duration’ growth stocks. Indeed, many of this year’s strongest performers are companies seeking to benefit from ‘disruptive’ technologies whose economic payback will not be seen for many years. We aren’t averse to ‘growth’, nor oblivious to the risk of an outdated world view, but seek to ensure that any reward is commensurate with the risk taken. In a paradigm characterised by a central bank backstop the extent to which valuation matters, however, is a legitimate debate. The pattern reversed slightly towards the end of the month as some tentative improvements in the economic data began to emerge.

Irish healthcare company, Uniphar, was the largest positive contributor to the fund’s performance. There was nothing specific to explain the rise in the share price but most likely it was a function of increased investor awareness. The company listed last year and has struggled to gain much traction with institutional investors. Maiden full-year results in late March were solid rather than spectacular but served to remind investors of its strong cash generation and growth opportunities. Global cyclicals Visa, TI Fluids, Synthomer and Ryanair performed well. The fund’s energy holdings rose as the oil price continued to recover as demand rebounded. Despite the lockdown we are in active dialogue with our portfolio holdings as well as many other businesses. Considerable uncertainty is the overarching feature of most of these conversations. Relative to expectations at the outset of the crisis, however, the outcome for most companies has been better than anticipated. Business development is challenging but many see the crisis as an opportunity to right-size their operations. This has implications for employment and aggregate final demand, but hopefully will result in a more productive economy over the longer term.

UK building materials company, Norcros, was the largest negative contributor to performance. The stock slumped as investors fretted over the shape of the economic recovery and how quickly construction activity will rebound. Energean was weak as its acquisition of Edison’s E&P business was delayed further.

New positions were initiated in Micron Technology, CRH, JDE Peet and Capgemini. The holding in DCC was exited. The position in Ryanair was increased.

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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