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SVM All Europe SRI Fund

SVM All Europe SRI Fund

Improving the responsibility of companies

Launched in 2006, this fund aims to achieve long term growth by investing in UK and European businesses that meet SVM's socially responsible criteria and where the current valuation offers an opportunity.

This Fund looks to improve corporate behaviour by using its influence as a shareholder in the most constructive way possible.

SVM All Europe SRI Fund

Improving the responsibility of companies

Launched in 2006, this fund aims to achieve long term growth by investing in UK and European businesses that meet SVM's socially responsible criteria and where the current valuation offers an opportunity.

This Fund looks to improve corporate behaviour by using its influence as a shareholder in the most constructive way possible.

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 Europe Index. It adopts a positive engagement approach toward investment and enters into meaningful dialogue with companies regarding environmental, social and corporate governance issues. Investments are made in European equities and other permitted securities.

Approach

SVM All Europe SRI Fund invests in well-managed, attractively priced businesses while at the same time seeking to improve their awareness, reporting and impact on the environment, society and corporate governance (ESG).

Our fund, which can invest right across the market capitalisation spectrum, is perfectly positioned to take advantage of the host of investment opportunities that this presents. We aim to find “hidden gems” with a strong earnings profile. We take a private equity-style approach to analysing their intrinsic value and their prospects for long-term earnings growth.

Analysis and research on ESG performance is an integrated part of our investment approach. Our purpose with each investment in the portfolio is to drive activities and processes that will improve companies’ impact on the environment and society. Companies are scored on a range of ESG criteria (with certain industries excluded altogether). We then engage with company management and invest on the basis of clear evidence and ongoing potential for improvement.

Investing for ESG impact in these undiscovered opportunities, you will own a portfolio that is different to most other Pan-European equity funds, and will perform differently too. The fund is designed to access specific growth opportunities in improving companies in Europe while diversifying your Pan-European equity exposure away from mainstream investments and indices.

You can invest with confidence in a fund that not only capitalises on our ability to identify undiscovered investment opportunities but also maximises the opportunity to influence corporate behaviour for the benefit of both the environment and society.

Fund Details

Launch Date31 October 2006
BenchmarkMSCI Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£20.7m

Data as at 31/12/2020.

Fund Managers

Neil Veitch
Global & UK Investment Director
14
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

Hugh Cuthbert
European Investment Manager
14
Years at SVM
26
Industry Experience

Hugh is lead manager of SVM Continental Europe Fund and co manager of SVM All Europe SRI Fund.

Prior to joining SVM, he spent five years with Kempen Capital Management where he was responsible for the management of pan European equities.

Academic Qualifications:
BA Public Administration

Professional Qualifications:

ASIP

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.

Synthomer6.1
Smurfit Kappa Group5.3
Forterra3.9
TI Fluid Systems3.7
Alpha FMC3.4
Prudential5.5
AXA4.2
OSB Group3.6
Lloyds Banking Group 3.3
Allianz1.7
Uniphar5.6
Roche Holdings3.6
DCC3.5
AstraZeneca 3.2
Norcros4.5
Tesco 3.9
Jost Werke2.9
Vistry Group2.3
Unilever1.9
Creo Medical Group3.2
Koninklijke Philips2.1
Barco1.6

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 All Europe SRI Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IA sector.

Top 10 Holdings (%)

Synthomer6.1
Uniphar5.6
Prudential5.5
Smurfit Kappa Group5.3
Norcros4.5
AXA4.2
Tesco 3.9
Forterra3.9
TI Fluid Systems3.7
OSB Group3.6
Rest of Portfolio53.7

Source: SVM, as at 31/12/2020

Sector Exposure (%)

Industrials36.2
Financials18.3
Health Care12.2
Consumer Goods10.8
Consumer Services9.5
Basic Materials6.1
Technology2.5

Source: SVM, as at 31/12/2020

Size Analysis (%)

Mega Cap (>€50bn)10.5
Large Cap (<€50bn)24.9
Mid Cap (<€10bn)34.1
Small Cap (<€1bn)26.1

Source: SVM, as at 31/12/2020

Geographic Analysis (%)

UK56.0
Ireland10.8
France10.0
Germany6.3
Netherlands4.1
Switzerland3.6
Sweden3.2
Belgium1.6

Source: SVM, as at 31/12/2020

Currency Exposure (%)

Euro36.2
Sterling52.6
Swiss Franc3.6
Swedish Krona3.2

Source: SVM, as at 31/12/2020

Show piebar chart

This Month's Featured Stock

Axa

From an ESG perspective French Insurer Axa can be considered best in class regarding the company’s approach to a host of non-financial matters. Not least is the proactive stance management have adopted to tackling the reporting demands of the TCFD or Task Force on Climate Related Financial Disclosure. Established in 2015 by the Financial Stability Board this organisation’s purpose is to both increase and improve company reporting on the impact of operations on the climate and the risks involved. Few are as advanced in this process as Axa who, in 2020, produced their 4th Climate Report. This report describes the progress the company is making toward implementing the objectives of the Paris Agreement. Central to Axa’s approach is the indicator they term “warming potential” which attempts to measure the impact of the group’s investments on global warming. Over the years the focus on this metric has led to the exclusion of the most polluting industries from the company’s own portfolio or a commitment to do so over a given time frame.

While Axa should be commended for their actions, we still believe there is more they can do regarding their approach to environmental, societal and governance matters, not least in the area of management remuneration. Currently the pay structures of the CEO and CFO have, in our opinion, a weak incentive for ESG performance which represents only 10% of total potential pay out. We have contacted Axa on this matter and there appears to be a willingness to listen. We look forward to the 2021 report to see if this can be backed up with action.

Performance

Performance (%)

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FundIndex
1 month3.42.3
2020 YTD1.82.7
1 year1.82.7
3 years5.711.9
5 years38.754.2
Since launch*248.6134.3
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
20201.82.7-0.9
201924.519.8+4.7
2018-16.6-9.0-7.6
201719.215.3+3.9
201610.119.6-9.5
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
323.40p
0.53%
Class B
360.10p
0.53%

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

Source: State Street, as at 15/01/2021.

Commentary

Equities made further gains during December. Investors were caught in the crosscurrents of the discovery of a new, more transmissible, Covid-19 variant and the announcement of a Brexit trade deal. For the month the fund returned 3.4% versus the MSCI Europe Index that returned 2.3%.

Stocks enjoyed a positive start to December as investors anticipated the introduction of mass vaccinations. However, the discovery of a number of new Covid variants and the likelihood of further lockdowns led to a pullback. Markets regained their poise as the UK and the EU finally agreed a trade deal. GBP and stocks exposed to the domestic economy rallied as the tail-risk of a no-deal Brexit was removed. The agreement is centred on traded goods and excludes the UK’s service sector. The performance of UK banks and life assurers was more muted as concerns grew over the future access of the UK’s hugely important financial services sector to European markets.

The conclusion of the Brexit deal highlights the significant constraints policymakers operate under. Despite bellicose rhetoric, politicians have a strong tendency to follow the path of least resistance. This is not to say that significant policy errors cannot occur, but that they happen less frequently than many a shrill commentary suggests.

In response to increasing case numbers many countries tightened Covid restrictions further. We continue to believe that markets will largely look through their short-term economic impact and focus on the potential for a significant recovery in the second half of the year. One of the biggest uncertainties as vaccines become available, and life begins to return to normal, will be the attitude of consumers and businesses towards savings and investment. The household savings rate has risen substantially during the pandemic and while this will come down the quantum and timing is unclear. Perhaps we are merely projecting our own biases, but we feel it is unlikely that households will dramatically increase their level of precautionary savings in a post-pandemic world. The recent significant rise in M&A activity certainly suggests corporates see little need to save for a rainy day.

There were many large positive contributors to performance over the month. Prudential Plc rose as investors looked for reflation plays. The ‘Pru’ has been a notable underperformer relative to its nearest peer, AIA, over the last twelve months and with Brexit out of the way we think there is scope for this to reverse. Industrial distributor, Rexel, was another holding to benefit from improving sentiment towards cyclical stocks. Creo Medical climbed as the company announced that one of its products had successfully been used to ablate a pancreatic tumour with no procedural complications. The device has the same dimensions as a routine biopsy needle and can be used in other highly perfused organs such as the liver, kidneys, and lungs. John Menzies gained as the outlook for the aviation sector improved. The shares were buoyed further by the announcement from Signature Aviation that it had received multiple takeover approaches. Volution Plc, a manufacturer and supplier of ventilation systems, rose as the company revealed that revenue and profits were ahead of expectations.

Simec Atlantis the renewable energy specialist was the only significant disappointment. We feel the timeline for their Uskmouth project is increasingly unrealistic and exited the position. The holding in va-Q-tec was also exited.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/12/2020.

Equities made further gains during December. Investors were caught in the crosscurrents of the discovery of a new, more transmissible, Covid-19 variant and the announcement of a Brexit trade deal. For the month the fund returned 3.4% versus the MSCI Europe Index that returned 2.3%.

Stocks enjoyed a positive start to December as investors anticipated the introduction of mass vaccinations. However, the discovery of a number of new Covid variants and the likelihood of further lockdowns led to a pullback. Markets regained their poise as the UK and the EU finally agreed a trade deal. GBP and stocks exposed to the domestic economy rallied as the tail-risk of a no-deal Brexit was removed. The agreement is centred on traded goods and excludes the UK’s service sector. The performance of UK banks and life assurers was more muted as concerns grew over the future access of the UK’s hugely important financial services sector to European markets.

The conclusion of the Brexit deal highlights the significant constraints policymakers operate under. Despite bellicose rhetoric, politicians have a strong tendency to follow the path of least resistance. This is not to say that significant policy errors cannot occur, but that they happen less frequently than many a shrill commentary suggests.

In response to increasing case numbers many countries tightened Covid restrictions further. We continue to believe that markets will largely look through their short-term economic impact and focus on the potential for a significant recovery in the second half of the year. One of the biggest uncertainties as vaccines become available, and life begins to return to normal, will be the attitude of consumers and businesses towards savings and investment. The household savings rate has risen substantially during the pandemic and while this will come down the quantum and timing is unclear. Perhaps we are merely projecting our own biases, but we feel it is unlikely that households will dramatically increase their level of precautionary savings in a post-pandemic world. The recent significant rise in M&A activity certainly suggests corporates see little need to save for a rainy day.

There were many large positive contributors to performance over the month. Prudential Plc rose as investors looked for reflation plays. The ‘Pru’ has been a notable underperformer relative to its nearest peer, AIA, over the last twelve months and with Brexit out of the way we think there is scope for this to reverse. Industrial distributor, Rexel, was another holding to benefit from improving sentiment towards cyclical stocks. Creo Medical climbed as the company announced that one of its products had successfully been used to ablate a pancreatic tumour with no procedural complications. The device has the same dimensions as a routine biopsy needle and can be used in other highly perfused organs such as the liver, kidneys, and lungs. John Menzies gained as the outlook for the aviation sector improved. The shares were buoyed further by the announcement from Signature Aviation that it had received multiple takeover approaches. Volution Plc, a manufacturer and supplier of ventilation systems, rose as the company revealed that revenue and profits were ahead of expectations.

Simec Atlantis the renewable energy specialist was the only significant disappointment. We feel the timeline for their Uskmouth project is increasingly unrealistic and exited the position. The holding in va-Q-tec was also exited.

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.

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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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