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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£12.7m

Data as at 31/08/2020.

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.

Microsoft9.8
Alphabet9.8
SK Hynix3.9
Synthomer4.4
Hitachi4.0
Denka3.4
Visa9.1
GVC Holdings 4.4
Ryanair 3.8
Uniphar5.2
Roche Holdings4.1
Jadestone Energy3.6
Energean2.0
Savannah Energy0.6
Prudential4.1

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 (%)

Microsoft9.8
Alphabet9.8
Visa9.1
Uniphar5.2
GVC Holdings 4.4
Synthomer4.4
Roche Holdings4.1
Prudential4.1
Hitachi4.0
SK Hynix3.9
Rest of Portfolio41.3

Source: SVM, as at 31/08/2020

Sector Exposure (%)

Oil & Gas6.2
Basic Materials7.7
Industrials11.2
Consumer Goods4.5
Health Care8.7
Consumer Services13.4
Financials13.2
Technology33.4

Source: SVM, as at 31/08/2020

Size Analysis (%)

Mega Cap (>£50bn)32.9
Large Cap (<£50bn)24.1
Mid Cap (<£10bn)18.6
Small Cap (<£1bn)22.7

Source: SVM, as at 31/08/2020

Geographic Analysis (%)

North America37.4
United Kingdom33.1
Europe (excluding UK)15.6
Asia Pacific (excluding Japan)5.0
Japan7.3

Source: SVM, as at 31/08/2020

Currency Exposure (%)

Euro13.5
Sterling30.6
Europe non-Euro4.1
US Dollar37.4
Japanese Yen7.3
Others5.0

Source: SVM, as at 31/08/2020

Show piebar chart

This Month's Featured Stock

Denka

Denka is a Japanese manufacturer and supplier of chemical products. Founded over 100 years ago, Denka makes products that serve a wide range of markets such as fertilisers, synthetic rubbers, resins used in semiconductor chips, and cement additives for the construction industry.

Although Denka’s results for the quarter to June were impacted by COVID-19, the longer-term ambitions of the group as set-out in its ‘Value-Up’ business plan remain. Denka intends to focus on growing in a number of priority areas including the healthcare, electric vehicle and value-added infrastructure markets. Doing this, alongside exiting more commoditised products should help the group’s operating profit margins improve from current high-single digit levels towards its target of 15% by 2023.

While the global pandemic has had a negative effect on many of Denka’s end markets, its healthcare business has been boosted by demand for diagnostic reagents and rapid point-of-care testing kits. In August, the company announced that it had received approval to manufacture and sell its rapid COVID antigen test kits in Japan. These can give a result in around 15 minutes without the need for any special testing equipment. The scale of the opportunity is uncertain, but it does provide some upside potential for current-year forecasts.

Currently trading on an estimated March 2021 PE of around 12x, we believe neither Denka’s growth opportunities or the potential for margin improvement are yet reflected in the valuation.

Performance

Performance (%)

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FundIndex
1 month4.73.8
2020 YTD-1.74.6
1 year11.26.7
3 years15.524.9
5 years61.078.5
Since launch*151.1158.3
Source: Lipper, as at 31/08/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
20204.95.4-0.5
20193.17.9-4.8
20188.19.8-1.7
201729.323.6+5.7
20160.79.2-8.5
Source: Lipper, as at 30/06/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
334.70p
2.39%
Class B
373.70p
2.38%

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

Source: State Street, as at 25/09/2020.

Commentary

Global equities continued to make new highs led by the relentless upwards march of technology stocks. Abundant liquidity, policy stimulus, and a weakening US dollar have created the fertile conditions necessary for speculative excess. Outside of the technology sector returns were more muted and the bifurcation in returns between the perceived Covid winners and losers remains extreme. The fund returned +4.7% versus the average fund that returned +3.8%.

The disease outlook remains the key variable for both economies and markets. The economic data remains mixed. Certain segments such as retail sales and housing transactions have recovered strongly while business investment and employment remain depressed. Indeed, US new and existing home sales hit their highest levels for ten years. New home sales were especially strong. September and October are key months for many businesses, particularly those exposed to business investment, and will provide a gauge of the strength and sustainability of the recovery. Should a vaccine prove effective there is the tantalising prospect of synchronised global recovery sometime in 2021. If this materialises then the current narrow equity market leadership will broaden out significantly.

Little newsworthy came out of the minutes of the July meeting of the Federal Reserve. Investors’ attention is now focused on the bank’s September meeting later in the month. The focus will be on the outlook for monetary policy and specifically whether the central bank is likely to deploy yield curve control. This has become particularly sensitive for markets given the recent pick-up in inflation expectations and the associated sell-off in longer dated government bonds.

Technology stocks performed strongly. Microsoft and Alphabet gained as investors continued to seek exposure to the perceived Covid winners. The significant outperformance of technology has led to fears that the sector is overextended and ripe for a pullback. While we share some of these concerns, we would caution that it is dangerous to treat technology as one homogenous sector. Some sub-sectors such as enterprise software certainly look expensive. Stocks like Microsoft and Alphabet, however, have exceptional balance sheets and continue to grow their revenues and cashflow at double digit rates. They will not be immune to a sell-off but are well positioned for the longer term. The biggest risk for ‘big tech’ continues to be greater regulation. GVC rose as sentiment towards the sector was aided by the announcement that IAC, led by US billionaire Barry Diller, had taken a significant stake in US casino operator, MGM, largely because of the potential upside from online gambling. We continue to believe that the US offers significant potential upside that is not yet reflected in the current share price. Visa rose as investors responded positively to signs of an economic recovery.

Semiconductor manufacturers, Micron and SK Hynix, declined as investors worried about customers’ inventory levels. These fears were confirmed when Micron cautioned that the current quarter would be back-end loaded and that visibility for the remainder of the year had declined. While we expect the shares to be volatile in the short term the positive longer-term drivers of the memory market remain intact.

There was limited trading activity. Profits were taken in CRH and CapGemini.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 31/08/2020.

Global equities continued to make new highs led by the relentless upwards march of technology stocks. Abundant liquidity, policy stimulus, and a weakening US dollar have created the fertile conditions necessary for speculative excess. Outside of the technology sector returns were more muted and the bifurcation in returns between the perceived Covid winners and losers remains extreme. The fund returned +4.7% versus the average fund that returned +3.8%.

The disease outlook remains the key variable for both economies and markets. The economic data remains mixed. Certain segments such as retail sales and housing transactions have recovered strongly while business investment and employment remain depressed. Indeed, US new and existing home sales hit their highest levels for ten years. New home sales were especially strong. September and October are key months for many businesses, particularly those exposed to business investment, and will provide a gauge of the strength and sustainability of the recovery. Should a vaccine prove effective there is the tantalising prospect of synchronised global recovery sometime in 2021. If this materialises then the current narrow equity market leadership will broaden out significantly.

Little newsworthy came out of the minutes of the July meeting of the Federal Reserve. Investors’ attention is now focused on the bank’s September meeting later in the month. The focus will be on the outlook for monetary policy and specifically whether the central bank is likely to deploy yield curve control. This has become particularly sensitive for markets given the recent pick-up in inflation expectations and the associated sell-off in longer dated government bonds.

Technology stocks performed strongly. Microsoft and Alphabet gained as investors continued to seek exposure to the perceived Covid winners. The significant outperformance of technology has led to fears that the sector is overextended and ripe for a pullback. While we share some of these concerns, we would caution that it is dangerous to treat technology as one homogenous sector. Some sub-sectors such as enterprise software certainly look expensive. Stocks like Microsoft and Alphabet, however, have exceptional balance sheets and continue to grow their revenues and cashflow at double digit rates. They will not be immune to a sell-off but are well positioned for the longer term. The biggest risk for ‘big tech’ continues to be greater regulation. GVC rose as sentiment towards the sector was aided by the announcement that IAC, led by US billionaire Barry Diller, had taken a significant stake in US casino operator, MGM, largely because of the potential upside from online gambling. We continue to believe that the US offers significant potential upside that is not yet reflected in the current share price. Visa rose as investors responded positively to signs of an economic recovery.

Semiconductor manufacturers, Micron and SK Hynix, declined as investors worried about customers’ inventory levels. These fears were confirmed when Micron cautioned that the current quarter would be back-end loaded and that visibility for the remainder of the year had declined. While we expect the shares to be volatile in the short term the positive longer-term drivers of the memory market remain intact.

There was limited trading activity. Profits were taken in CRH and CapGemini.

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.

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0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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