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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 objective of the Fund is to achieve capital growth over the long term (5 years or more) and it aims to outperform the MSCI ACWI IMI. The Fund will identify investment opportunities in companies globally whose future growth is not reflected in current market expectations. The Fund will invest at least 80% in global equities and other equity related instruments. The Fund may invest in other permitted securities.

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
BenchmarkMSCI ACWI IMI Index
IA SectorGlobal
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£17.3m

Data as at 30/04/2021.

Fund Manager

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

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.

Alphabet8.2
Microsoft7.7
SK Hynix5.0
Synthomer4.6
Hitachi4.1
Alpha FMC3.4
Visa5.7
Entain4.9
Ryanair 3.8
Uniphar5.1
Roche Holdings2.7
Bristol-Myers Squibb1.8
Jadestone Energy2.7
Pantheon Resources0.9
Savannah Energy0.8
Prudential3.8

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 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 (%)

Alphabet8.2
Microsoft7.7
Visa5.7
Uniphar5.1
SK Hynix5.0
Micron Technology5.0
Entain4.9
MagnaChip Semiconductor4.6
Synthomer4.6
Hitachi4.1
Rest of Portfolio44.9

Source: SVM, as at 30/04/2021

Sector Exposure (%)

Information Technology35.7
Health Care13.4
Industrials12.0
Communication Services10.4
Consumer Discretionary10.4
Materials7.9
Energy4.3
Financials3.8

Source: SVM, as at 30/04/2021

Size Analysis (%)

Mega Cap (>£50bn)39.1
Large Cap (<£50bn)13.8
Mid Cap (<£10bn)22.1
Small Cap (<£1bn)22.8

Source: SVM, as at 30/04/2021

Geographic Analysis (%)

North America38.1
United Kingdom34.8
Europe (excluding UK)11.6
Asia Pacific (excluding Japan)5.8
Japan7.5

Source: SVM, as at 30/04/2021

Currency Exposure (%)

Euro8.9
Sterling37.4
Europe non-Euro2.7
US Dollar38.4
Japanese Yen7.5
Others5.8

Source: SVM, as at 30/04/2021

Show piebar chart

This Month's Featured Stock

TI Fluid Systems

TI Fluid Systems (TI) is a manufacturer of fluid control systems and fuel tanks for the automotive industry. The group is a global leader in the brake and fuel line market, with over 30% market share, supplying major OEMs such as Volkswagen, Daimler, and Toyota.

The automotive market is transitioning rapidly from internal combustion engine (ICE) cars towards hybrid-electric and battery-electric vehicles (HEV/BEV). At its recent Capital Markets Day, TI outlined why it is well-positioned to thrive in such an environment. The cooling requirements for a BEV are significant because of the heat generated by their batteries. TI provides the coolant and refrigerant lines required to maintain optimal operating temperatures. In ICE cars, TI has an average content per vehicle of €56 with a maximum of €288. In BEV’s, the average is €135 with a maximum of €480. Hybrid vehicles offer more upside from these figures, with the requirement for pressure-resistant fuel tanks playing into a segment of the market where TI is particularly strong.

As the pace at which OEMs launch new BEV platforms accelerates, TI has been successful in ensuring that its products are represented. Of the 46 key BEV platforms coming to market in Europe and North America between 2020 and 2022, TI is present on more than two-thirds. Combined with a strong product development strategy, the group is well positioned to increase its content per vehicle significantly.

Currently trading on an estimated 2022 EV/EBITDA of 4.5x, we believe the market has failed to recognise TI’s growth potential. With a strong track record of cash generation and robust balance sheet, the group is also well-positioned to participate in returns-enhancing M&A activity if the opportunity presents.

Performance

Performance (%)

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FundIndex
1 month5.94.3
2021 YTD17.57.8
1 year48.433.8
3 years59.145.6
5 years117.699.6
Since launch*242.9205.8
Source: Lipper, as at 30/04/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
202154.040.8+13.2
2020-4.4-6.0+1.6
20197.09.5-2.5
20180.23.5-3.3
201728.329.4-1.1
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
430.30p
-0.42%
Class B
482.70p
-0.41%

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

Source: State Street, as at 14/05/2021.

Commentary

Global equity markets made further progress in April. Strong corporate earnings and an improving economic outlook fuelled the gains. Global economic momentum is strong but with considerable variation between countries and regions. In places with advanced vaccination programs, such as the UK, infection rates and hospitalisations are falling dramatically and the economy is rebounding strongly. In contrast, Brazil and India are witnessing a significant rise in infections and their healthcare systems are struggling to cope. The fund rose 5.9% versus the MSCI ACWI IMI NR that returned 4.0%.

The unprecedented nature of the Covid recession was highlighted by data from The Office for National Statistics showing that household wealth had risen to record levels on the back of rising house prices, increased value of defined benefit pensions, and government support. Household net wealth rose to £11.4 trillion, the equivalent of £172k per person in the UK. The increase in household wealth at a time of increasing public sector indebtedness will invariably lead to further questions over the intergenerational fairness of the economy. With the preferences of the median voter continuing to shift leftwards, some form of wealth tax appears inevitable. The direction of travel is already evident in the US where President Biden is planning to roughly double the top rate of federal tax on capital and dividends.

As economies become older and wealthier, and the dependency ratio increases, the focus will not only be on taxation but the potential longer-term impact on inflation. The reintegration of Eastern Europe and China into the global economy generated a significant positive supply shock that reduced labour costs and kept inflation low. As demographics deteriorate there is every possibility that inflationary pressures increase. Inflation remains the biggest risk to equity markets both in the short and longer-term. The Federal Reserve faces a difficult task in balancing short-term base effects against the risk of rising inflation expectations. We are positive on equity markets but expect volatility to increase.

The fund’s cyclical stocks generally gained on the back of strong earnings and an improving global economy. Synthomer rose as it announced that current trading was ahead of expectations. The company is not only benefitting from the strength of the nitrile market but is also seeing a sharp rebound in its more cyclical activities.  Norcros rose as it remarkably raised its profit guidance for the third time in a month. Entain gained as the company substantially increased their view of the size of the addressable market in the US. Online gaming remains in its infancy in the US, but the potential is significant. Alpha Financial Markets Consulting rose as the company delivered a positive trading update and investors looked forward to the potential of the North American market.  Uniphar gained after a period of underperformance.

The fund’s technology holdings continued to benefit from the digitalisation of the global economy. Alphabet delivered a spectacular set of results with net revenues increasing 35% y/y and operating margins reaching 36%, the highest since Q1 2015. YouTube was particularly impressive with revenues increasing 49%. These growth rates are even more remarkable given the size of the company. Microsoft’s revenue grew 19% and operating profit grew 31%. As the company noted in its earnings release, despite being a year into the pandemic, digital adoption rates are not slowing down but accelerating and this is only the beginning. Despite all the ‘noise’ around technology stocks, we believe a number of them look very reasonably priced given their growth.

There were no particular disappointments during the month. Trading activity was minimal.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 30/04/2021.

Global equity markets made further progress in April. Strong corporate earnings and an improving economic outlook fuelled the gains. Global economic momentum is strong but with considerable variation between countries and regions. In places with advanced vaccination programs, such as the UK, infection rates and hospitalisations are falling dramatically and the economy is rebounding strongly. In contrast, Brazil and India are witnessing a significant rise in infections and their healthcare systems are struggling to cope. The fund rose 5.9% versus the MSCI ACWI IMI NR that returned 4.0%.

The unprecedented nature of the Covid recession was highlighted by data from The Office for National Statistics showing that household wealth had risen to record levels on the back of rising house prices, increased value of defined benefit pensions, and government support. Household net wealth rose to £11.4 trillion, the equivalent of £172k per person in the UK. The increase in household wealth at a time of increasing public sector indebtedness will invariably lead to further questions over the intergenerational fairness of the economy. With the preferences of the median voter continuing to shift leftwards, some form of wealth tax appears inevitable. The direction of travel is already evident in the US where President Biden is planning to roughly double the top rate of federal tax on capital and dividends.

As economies become older and wealthier, and the dependency ratio increases, the focus will not only be on taxation but the potential longer-term impact on inflation. The reintegration of Eastern Europe and China into the global economy generated a significant positive supply shock that reduced labour costs and kept inflation low. As demographics deteriorate there is every possibility that inflationary pressures increase. Inflation remains the biggest risk to equity markets both in the short and longer-term. The Federal Reserve faces a difficult task in balancing short-term base effects against the risk of rising inflation expectations. We are positive on equity markets but expect volatility to increase.

The fund’s cyclical stocks generally gained on the back of strong earnings and an improving global economy. Synthomer rose as it announced that current trading was ahead of expectations. The company is not only benefitting from the strength of the nitrile market but is also seeing a sharp rebound in its more cyclical activities.  Norcros rose as it remarkably raised its profit guidance for the third time in a month. Entain gained as the company substantially increased their view of the size of the addressable market in the US. Online gaming remains in its infancy in the US, but the potential is significant. Alpha Financial Markets Consulting rose as the company delivered a positive trading update and investors looked forward to the potential of the North American market.  Uniphar gained after a period of underperformance.

The fund’s technology holdings continued to benefit from the digitalisation of the global economy. Alphabet delivered a spectacular set of results with net revenues increasing 35% y/y and operating margins reaching 36%, the highest since Q1 2015. YouTube was particularly impressive with revenues increasing 49%. These growth rates are even more remarkable given the size of the company. Microsoft’s revenue grew 19% and operating profit grew 31%. As the company noted in its earnings release, despite being a year into the pandemic, digital adoption rates are not slowing down but accelerating and this is only the beginning. Despite all the ‘noise’ around technology stocks, we believe a number of them look very reasonably priced given their growth.

There were no particular disappointments during the month. Trading activity was minimal.

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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