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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£15.1m

Data as at 31/03/2020.

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.

Microsoft8.1
Alphabet7.8
SK Hynix4.8
DCC5.1
Roche Holdings3.5
Diageo3.4
Hitachi6
Synthomer4
Denka3
Visa7.8
GVC Holdings 3.4
Ryanair 1.6
Prudential3.6
Jadestone Energy2.0
Savannah Petroleum 0.5

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 (%)

Microsoft8.1
Alphabet7.8
Visa7.8
Hitachi6.1
DCC5.1
SK Hynix4.8
Synthomer3.7
Prudential3.6
Roche Holdings3.5
Diageo3.4
Rest of Portfolio46.1

Source: SVM, as at 31/03/2020

Sector Exposure (%)

Oil & Gas2.6
Basic Materials6.6
Industrials16.4
Consumer Goods7.5
Health Care9.2
Consumer Services7.8
Utilities3.1
Financials11.4
Technology23.7

Source: SVM, as at 31/03/2020

Size Analysis (%)

Mega Cap (>£50bn)33.9
Large Cap (<£50bn)17.7
Mid Cap (<£10bn)16.7
Small Cap (<£1bn)19.9

Source: SVM, as at 31/03/2020

Geographic Analysis (%)

North America31.9
United Kingdom33.6
Europe (excluding UK)7.9
Asia Pacific (excluding Japan)5.8
Japan9.1

Source: SVM, as at 31/03/2020

Currency Exposure (%)

Euro4.4
Sterling37.1
Europe non-Euro3.5
US Dollar42.1
Japanese Yen9.1
Others5.8

Source: SVM, as at 31/03/2020

Show piebar chart

This Month's Featured Stock

Microsoft

Microsoft is one of the world’s largest technology companies. The group develops, licenses, supports and sells computer software, consumer electronics, personal computers, and related services.

The coronavirus pandemic has forced businesses and organisations around the world to rapidly enable significant proportions of their workforce to work-from-home. That this appears to have gone relatively smoothly is thanks in no small part to the technology developed in recent years by Microsoft. The group’s Microsoft Teams collaboration software saw daily active users increase from 32 million to 44 million in just a week. In mid-March Teams was recording around 900 million meeting minutes a day, this has recently increased to 2.7 billion. The company’s Azure suite of cloud service products have seen a 775% increase in usage and has not experienced any significant service disruptions.

The spike in activity will subside once the pandemic fades but there are likely to be long-lasting changes to how businesses operate, and Microsoft is well placed to benefit. Despite having revenues in excess of $100bn, Microsoft has consistently been able to deliver double-digit top-line growth. Although some of the group’s more consumer-facing businesses (Surface tablets; Xbox) may face some short-term from disruption in supply chains and weaker spending, these should be more than offset by growth elsewhere.

Currently trading on a c.4% free cash flow yield and with significant cash on the balance sheet, we think the rating fails to reflect Microsoft’s position as one of the strongest companies in the world or its excellent growth opportunities.

Performance

Performance (%)

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FundIndex
1 month-8.7-10.1
2020 YTD-17.7-15.6
1 year-4.4-6.3
3 years2.65.1
5 years27.931.8
Since launch*110.2107.2
Source: Lipper, as at 31/03/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
2020-4.4-6.2+1.8
20197.09.0-2.0
20180.23.5-3.3
201728.329.0-0.7
2016-2.8-2.2-0.6
Source: Lipper, as at 31/03/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
312.60p
1.26%
Class B
348.10p
1.28%

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

Source: State Street, as at 22/05/2020.

Commentary

Equity markets fell precipitously in March as the spread of COVID-19 became apparent. National governments responded to the pandemic by ‘locking down’ their economies in an attempt to contain the spread of the virus and prevent their health systems from being overwhelmed. The placing of the majority of the global economy into a form of suspended animation is unprecedented and has created significant financial and economic stress. Policy makers responded appropriately. Central banks injected significant liquidity into the system while national governments took steps to support household and corporate balance sheets. The significant policy response led to equities recouping some of their losses. Nonetheless, the average fund declined  -10.1% over the month. The fund returned  -8.7%.

Last month we commented how we were positioned for a recovery in global economic growth. This was detrimental to the fund’s performance in both February and March. Jadestone fell in response to the lower oil price. In response to OPEC+ failing to agree to a production cut at its meeting in early March, Saudi Arabia, the largest producer in the group, announced it was increasing its production with the objective of flooding the global market with oil and pushing the price down. The most pernicious impact on the portfolio, however, was through those businesses who in normal circumstances should be fairly resilient. Gaming company, GVC’s, revenue has been relatively stable through numerous recessions but what if there is no sport to bet on? Building materials businesses with strong balance sheets such as Norcros have traded through many downturns, but how strong does a balance sheet need to be if there is no revenue? All of these stocks were significant negative contributors during the month. Technology stocks were the main outperformers. Team17 rose as the company released another positive update. Microsoft outperformed as the current lockdown highlighted the importance of its products. New holdings Roche and DCC made meaningful positive contributions.

Trading activity was significant. In response to the emerging economic threat from the coronavirus we reduced the cyclicality of the portfolio in late February and very early March. During this period the holdings in Canada Pacific Railway, Delta Airlines, AIA, Wizz Air and Disney were exited. The holdings in Ryanair, Luxfer and SK Hynix were reduced. The significant sell-off mid-month was used to add new positions in DCC, Merck, National Grid, Roche and Diageo. The holding in Alphabet was substantially increased.

We’ve written before about our unscientific, but hitherto wholly accurate, ‘muddle-through’ philosophy. Even in the depths of the global financial crisis, when investors could have been mistaken for thinking the sky was falling, we stuck to this tenet. While times were undeniably hard, the rhythm of daily life continued much the same as before. This is different. Coronavirus’ impact is not limited to the financial realm, significant as this will be, but will influence how society is structured and people behave. In recognition of this uncertainty we have retained significant flexibility in order to respond to opportunities as they evolve.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 31/03/2020.

Equity markets fell precipitously in March as the spread of COVID-19 became apparent. National governments responded to the pandemic by ‘locking down’ their economies in an attempt to contain the spread of the virus and prevent their health systems from being overwhelmed. The placing of the majority of the global economy into a form of suspended animation is unprecedented and has created significant financial and economic stress. Policy makers responded appropriately. Central banks injected significant liquidity into the system while national governments took steps to support household and corporate balance sheets. The significant policy response led to equities recouping some of their losses. Nonetheless, the average fund declined  -10.1% over the month. The fund returned  -8.7%.

Last month we commented how we were positioned for a recovery in global economic growth. This was detrimental to the fund’s performance in both February and March. Jadestone fell in response to the lower oil price. In response to OPEC+ failing to agree to a production cut at its meeting in early March, Saudi Arabia, the largest producer in the group, announced it was increasing its production with the objective of flooding the global market with oil and pushing the price down. The most pernicious impact on the portfolio, however, was through those businesses who in normal circumstances should be fairly resilient. Gaming company, GVC’s, revenue has been relatively stable through numerous recessions but what if there is no sport to bet on? Building materials businesses with strong balance sheets such as Norcros have traded through many downturns, but how strong does a balance sheet need to be if there is no revenue? All of these stocks were significant negative contributors during the month. Technology stocks were the main outperformers. Team17 rose as the company released another positive update. Microsoft outperformed as the current lockdown highlighted the importance of its products. New holdings Roche and DCC made meaningful positive contributions.

Trading activity was significant. In response to the emerging economic threat from the coronavirus we reduced the cyclicality of the portfolio in late February and very early March. During this period the holdings in Canada Pacific Railway, Delta Airlines, AIA, Wizz Air and Disney were exited. The holdings in Ryanair, Luxfer and SK Hynix were reduced. The significant sell-off mid-month was used to add new positions in DCC, Merck, National Grid, Roche and Diageo. The holding in Alphabet was substantially increased.

We’ve written before about our unscientific, but hitherto wholly accurate, ‘muddle-through’ philosophy. Even in the depths of the global financial crisis, when investors could have been mistaken for thinking the sky was falling, we stuck to this tenet. While times were undeniably hard, the rhythm of daily life continued much the same as before. This is different. Coronavirus’ impact is not limited to the financial realm, significant as this will be, but will influence how society is structured and people behave. In recognition of this uncertainty we have retained significant flexibility in order to respond to opportunities as they evolve.

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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