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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 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£15m

Data as at 28/02/2021.

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.

Alphabet8.0
Microsoft7.3
SK Hynix6.2
Visa6.8
Entain5.5
Ryanair 4.2
Synthomer4.7
Hitachi4.3
Denka3.6
Uniphar3.8
Roche Holdings3.1
Jadestone Energy3.4
Pantheon Resources1.1
Savannah Energy1.0
Prudential3.9

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 (%)

Alphabet8.0
Microsoft7.3
Visa6.8
SK Hynix6.2
Micron Technology6.0
Entain5.5
Synthomer4.7
MagnaChip Semiconductor4.4
Hitachi4.3
Ryanair 4.2
Rest of Portfolio42.7

Source: SVM, as at 28/02/2021

Sector Exposure (%)

Technology31.8
Consumer Services16.4
Industrials12.0
Financials10.7
Basic Materials8.3
Health Care7.5
Oil & Gas5.5
Consumer Goods4.9

Source: SVM, as at 28/02/2021

Size Analysis (%)

Mega Cap (>£50bn)40.1
Large Cap (<£50bn)14.6
Mid Cap (<£10bn)18.7
Small Cap (<£1bn)23.6

Source: SVM, as at 28/02/2021

Geographic Analysis (%)

North America37.4
United Kingdom33.5
Europe (excluding UK)11.1
Asia Pacific (excluding Japan)7.1
Japan7.9

Source: SVM, as at 28/02/2021

Currency Exposure (%)

Euro8.0
Sterling33.8
Europe non-Euro3.1
US Dollar39.2
Japanese Yen7.9
Others7.1

Source: SVM, as at 28/02/2021

Show piebar chart

This Month's Featured Stock

Norcros

Norcros is a supplier of bathroom and kitchen products in the UK and South Africa. The company designs and manufactures showers, taps, tiles and other related products under a wide range of brands such as Triton, Abode, and Vado.

Norcros’ operating performance in 2020 was heavily impacted by Covid. In Q2, Norcros’ revenues dropped by over 40% as restrictions impacted demand. The strength of the recovery since then has been impressive. In Q3, Norcros saw like-for-like revenues increase by 5%. While the group benefited from a strong RMI market in the UK and positive longer-term trends for bathroom and plumbing products in South Africa, it also gained market share at the expense of competitors. Norcros’ decentralised operating model allowed it to react nimbly, while it had sufficient scale to ensure that it could meet the demands of both existing and new customers.

Norcros’ pension has always been something of a millstone around management’s neck. Although the net deficit isn’t large, gross liabilities of c.£450m are more than double the group’s market cap. The scheme, however, is super-mature with a rapidly reducing membership and the prospect of higher inflation should help lessen investor concerns.

With minimal net debt, management can also augment the group’s organic growth prospects with returns-enhancing M&A. Trading on an estimated March-2022 PE of less than 10x, we believe that Norcros’ impressive operating performance and growth prospects are not reflected in its current share price.

Performance

Performance (%)

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FundIndex
1 month4.70.5
2021 YTD7.00.3
1 year35.622.9
3 years44.535.4
5 years100.091.4
Since launch*212.3185.1
Source: Lipper, as at 28/02/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 01/12/2010.
FundIndexDifference
202014.215.2-1.0
201930.622.3+8.3
2018-12.9-5.2-7.7
201712.914.5-1.6
201622.024.4-2.4
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
414.50p
-0.24%
Class B
464.30p
-0.24%

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

Source: State Street, as at 05/03/2021.

Commentary

Equities were mixed during February. Markets bounced early in the month as concerns over new virus variants and their potential to reduce vaccine efficacy eased. Improving vaccine sentiment and generally better than expected economic data led to a sell-off in government bonds. The increase in yields accelerated into month-end as Fed Chairman Powell testified that he remained unconcerned about the inflation outlook and US jobs data came in ahead of expectations. The volatility in the bond market led to a pullback in equities. The fund returned 4.7% for the month versus 0.8% for the MSCI ACWI IMI index.

The increase in bond yields was particularly pronounced in the US where investors have become concerned that President Biden’s stimulus package will result in an increase in inflation. This has led to a spirited debate between economists about the potential for inflationary pressures to become entrenched and potentially choke off the economic recovery. The debate has not just been confined to the US. Bank of England chief economist, Andy Haldane, warned that central banks ran the risk of becoming complacent on inflation as the economy recovers from the coronavirus pandemic.

Outside of a resurgence in the virus, the potential for significantly higher bond yields is the biggest risk facing equity markets. Every strategist/economist/fund manager has offered their view on what rising yields mean for equities. The honest answer is that no-one really knows. Economists still can’t even agree what the primary determinant of long-term interest rates are. The best guess, somewhat counterintuitively, is short-term rates. Markets are complex, adaptive systems where relatively small changes in inputs can result in significant changes to outcomes. We believe that a rise in yields is more likely to result in changing relative valuations within markets, rather than the catalyst for a sustained market reversal. Volatility, however, will remain higher than usual.

At a stock level the fund benefitted from its exposure to some of the more economically sensitive sectors of the market. Oil & gas stocks rose as the oil price continued to move higher. The market appears to be gradually realising that while oil demand is unlikely to dramatically rise from pre-Covid levels, supply may well disappoint. Semiconductor stocks, Micron, SK Hynix, and Magnachip were all in demand as chip pricing continued to improve. The outlook for DRAM pricing, in particular, looks robust. Prudential bounced following last month’s overreaction to the announcement that it was going to ‘spin-out’ Jackson, its US life business, as opposed to an IPO. Entain rebounded after last month’s announcement that it was no longer in takeover talks. Indeed, the shares are now higher than when discussions were terminated.

M&A activity was again a feature of the market. Specialty chemical maker, Synthomer, was speculated to have been approached by private equity firm, CVC Capital. Pointedly, Synthomer announced that it was not currently in takeover discussions, but never stated that it had not been approached. Takeover rumours swirled around a number of other mid-cap companies. Corporate financiers are busy and we would expect to see more bids over the next few weeks and months. Such an environment is generally positive for the fund’s performance.

A new holding was taken in Amazon post the announcement that highly regarded CEO, Jeff Bezos, was stepping down.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 28/02/2021.

Equities were mixed during February. Markets bounced early in the month as concerns over new virus variants and their potential to reduce vaccine efficacy eased. Improving vaccine sentiment and generally better than expected economic data led to a sell-off in government bonds. The increase in yields accelerated into month-end as Fed Chairman Powell testified that he remained unconcerned about the inflation outlook and US jobs data came in ahead of expectations. The volatility in the bond market led to a pullback in equities. The fund returned 4.7% for the month versus 0.8% for the MSCI ACWI IMI index.

The increase in bond yields was particularly pronounced in the US where investors have become concerned that President Biden’s stimulus package will result in an increase in inflation. This has led to a spirited debate between economists about the potential for inflationary pressures to become entrenched and potentially choke off the economic recovery. The debate has not just been confined to the US. Bank of England chief economist, Andy Haldane, warned that central banks ran the risk of becoming complacent on inflation as the economy recovers from the coronavirus pandemic.

Outside of a resurgence in the virus, the potential for significantly higher bond yields is the biggest risk facing equity markets. Every strategist/economist/fund manager has offered their view on what rising yields mean for equities. The honest answer is that no-one really knows. Economists still can’t even agree what the primary determinant of long-term interest rates are. The best guess, somewhat counterintuitively, is short-term rates. Markets are complex, adaptive systems where relatively small changes in inputs can result in significant changes to outcomes. We believe that a rise in yields is more likely to result in changing relative valuations within markets, rather than the catalyst for a sustained market reversal. Volatility, however, will remain higher than usual.

At a stock level the fund benefitted from its exposure to some of the more economically sensitive sectors of the market. Oil & gas stocks rose as the oil price continued to move higher. The market appears to be gradually realising that while oil demand is unlikely to dramatically rise from pre-Covid levels, supply may well disappoint. Semiconductor stocks, Micron, SK Hynix, and Magnachip were all in demand as chip pricing continued to improve. The outlook for DRAM pricing, in particular, looks robust. Prudential bounced following last month’s overreaction to the announcement that it was going to ‘spin-out’ Jackson, its US life business, as opposed to an IPO. Entain rebounded after last month’s announcement that it was no longer in takeover talks. Indeed, the shares are now higher than when discussions were terminated.

M&A activity was again a feature of the market. Specialty chemical maker, Synthomer, was speculated to have been approached by private equity firm, CVC Capital. Pointedly, Synthomer announced that it was not currently in takeover discussions, but never stated that it had not been approached. Takeover rumours swirled around a number of other mid-cap companies. Corporate financiers are busy and we would expect to see more bids over the next few weeks and months. Such an environment is generally positive for the fund’s performance.

A new holding was taken in Amazon post the announcement that highly regarded CEO, Jeff Bezos, was stepping down.

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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