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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. The Fund will invest at least 80% in equities and equity related instruments which are dealt in or traded on all European Eligible Securities Markets. The Fund may invest in 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.

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Fund Details

Launch Date31 October 2006
BenchmarkMSCI Europe Index
IA SectorEurope inc UK
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£16.9m

Data as at 31/05/2022.

Fund Managers

Neil Veitch
Global & UK Investment Director
16
Years at SVM
25
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
16
Years at SVM
27
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.

Alpha FMC8.0
Rexel5.6
Smurfit Kappa Group5.5
Synthomer5.1
CRH4.5
OSB Group5.1
AXA4.7
Lloyds Banking Group 4.4
Prudential4.2
Legal & General2.7
Norcros6.7
Tesco 3.0
Dalata Hotel Group2.5
Jost Werke2.4
Uniphar4.5
DCC3.3
Smith & Nephew2.7
Sedana Medical0.7
Apontis Pharma0.6
Creo Medical Group2.7
LungLife AI1.9
Calnex Solutions1.1
ActiveOps0.5

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

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 (%)

Alpha FMC8.0
Norcros6.7
Rexel5.6
Smurfit Kappa Group5.5
OSB Group5.1
Synthomer5.1
AXA4.7
Uniphar4.5
CRH4.5
Lloyds Banking Group 4.4
Rest of Portfolio45.9

Source: SVM, as at 31/05/2022

Sector Exposure (%)

Industrials32.2
Financials21.2
Materials18.9
Health Care13.1
Information Technology5.7
Consumer Discretionary5.1
Consumer Staples3.0

Source: SVM, as at 31/05/2022

Size Analysis (%)

Large Cap (<€50bn)30.3
Mid Cap (<€10bn)37.5
Small Cap (<€1bn)31.2

Source: SVM, as at 31/05/2022

Geographic Analysis (%)

UK64.0
Ireland17.0
France14.4
Germany3.0
Sweden0.7

Source: SVM, as at 31/05/2022

Currency Exposure (%)

Euro34.4
Sterling64.0
Swedish Krona0.7

Source: SVM, as at 31/05/2022

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This Month's Featured Stock

Calnex Solutions

There is a burgeoning demand for the equipment and technology that will fuel the further digitisation of our lives in the years to come. A host of new technologies exist to deliver smart cities brimming with voice activation, data collecting sensors and autonomous driving cars. But for this to become a reality something more mundane is required to host the sophisticated new products and services, and that is an efficient and effective telecoms network to provide the backbone for this exciting new future. Despite its relatively small size, with a market capitalisation under £150m, Calnex Solutions plays a significant global role in delivering the quality of network required to meet this need. The company’s products are responsible for testing and maintaining both networks and datacentres and has seen robust growth in recent years. Customers appear to have faith in the products they supply evidenced by the average customer retention rate of some 9 years. Following a strategy of quality over quantity the company has become a reliable partner for telecoms company’s worldwide who are happy to pay a premium for reliability particularly when testing and maintenance represents only a small portion of their overall capex budgets. This also allows Calnex Solutions to boast healthy gross margins, in some instances as high as 80%.

While focussing on managing the exponential growth they have experienced the company has been less successful in providing a comprehensive ESG strategy and reporting structure. We have had discussions with the company’s CFO regarding this issue and we are promised improvements in the upcoming annual report (the company has a March year-end). Improvements in this area should not only reduce the company’s underlying ESG risk profile but also enhance shareholder value in what is already an attractive investment proposition.

Performance

Performance (%)

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FundIndex
1 month-1.10.6
2022 YTD-12.0-5.0
1 year-8.42.5
3 years29.725.1
5 years25.729.0
Since launch*287.3162.8
Source: Lipper, as at 31/05/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
20221.29.1-7.9
202158.930.9+28.0
2020-17.7-10.6-7.1
2019-4.74.3-9.0
20189.62.6+7.0
Source: Lipper, as at 31/03/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
319.10p
-3.07%
Class B
359.20p
-3.05%

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

Source: State Street, as at 28/06/2022.

Commentary

The outlook for inflation and by extension interest rates once again determined market direction. Equities sold off early in the month but rallied post the release of the minutes of the latest Federal Reserve Board meeting. Investors were comforted that members of the FOMC appeared to realise the nuances around the inflation outlook and that the Fed was not stuck on autopilot. The positive sentiment was reinforced by strong earnings from US retailers Dollar Tree and Macy’s, which reassured investors post disappointing updates from Target and Walmart. The pattern of consumption maybe changing but overall expenditure currently remains robust. The fund returned -1.1% versus the MSCI Europe GTR that returned 0.6%.

The economic outlook remains clouded. The conflict in Ukraine is ongoing and continues to put upward pressure on commodities, most notably wheat and oil. China is zealously pursuing its zero Covid policy with the obvious impact on economic growth. Chinese retail sales fell 11% in April. Elsewhere both consumer and business confidence have sharply deteriorated. Despite these headwinds, earnings expectations are holding up reasonably well. This has been interpreted negatively in some quarters as many investors believe we need to witness more significant downwards revisions for the market to bottom. Equities may remain choppy over summer until the outlook for earnings becomes clearer, but should the economy prove more resilient than the current negative consensus then the upside in some sectors and stocks could be significant. Interestingly, in the last month corporate executives in the US bought shares in their companies at the highest rate since the financial crisis.

With unemployment low and wage growth robust we believe the risk of the much-vaunted consumer crisis is overdone. Our faith in the resilience of the consumer was well established before the Chancellor unveiled his latest package of support. As such the economic merits of the additional help for the consumer are debatable but the political reality was clear. In Europe the economic picture is more mixed. The ECB has stated its desire to normalise monetary policy although determining what that is at the current juncture is incredibly difficult. Europe has not had the same level of fiscal stimulus as the US, or to a lesser degree the UK, and inflation has been predominantly driven by supply side factors. Medium to long term inflation expectations remain well anchored and the prospect of excessive wage growth seems unlikely given the slack in the economy. Yet the ECB continues to ratchet up its tightening rhetoric and risks making a policy mistake. The spread between German bunds and the periphery has widened and consequently monetary policy is not being transmitted equally across the continent.

Cyclicals rallied as investors took comfort from the resilience of corporate earnings. Automotive/industrial exposed names Jost Werke and TI Fluids responded positively. Brick producer, Forterra, rose as a trading update revealed that trading had been resilient and that profit for the current year would be materially ahead of expectations. The company’s new Desford facility will come on stream late next year resulting in a step up in profitability. The small holding in software company, ActiveOps, was the worst performer.

Trading activity was limited.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/05/2022.

The outlook for inflation and by extension interest rates once again determined market direction. Equities sold off early in the month but rallied post the release of the minutes of the latest Federal Reserve Board meeting. Investors were comforted that members of the FOMC appeared to realise the nuances around the inflation outlook and that the Fed was not stuck on autopilot. The positive sentiment was reinforced by strong earnings from US retailers Dollar Tree and Macy’s, which reassured investors post disappointing updates from Target and Walmart. The pattern of consumption maybe changing but overall expenditure currently remains robust. The fund returned -1.1% versus the MSCI Europe GTR that returned 0.6%.

The economic outlook remains clouded. The conflict in Ukraine is ongoing and continues to put upward pressure on commodities, most notably wheat and oil. China is zealously pursuing its zero Covid policy with the obvious impact on economic growth. Chinese retail sales fell 11% in April. Elsewhere both consumer and business confidence have sharply deteriorated. Despite these headwinds, earnings expectations are holding up reasonably well. This has been interpreted negatively in some quarters as many investors believe we need to witness more significant downwards revisions for the market to bottom. Equities may remain choppy over summer until the outlook for earnings becomes clearer, but should the economy prove more resilient than the current negative consensus then the upside in some sectors and stocks could be significant. Interestingly, in the last month corporate executives in the US bought shares in their companies at the highest rate since the financial crisis.

With unemployment low and wage growth robust we believe the risk of the much-vaunted consumer crisis is overdone. Our faith in the resilience of the consumer was well established before the Chancellor unveiled his latest package of support. As such the economic merits of the additional help for the consumer are debatable but the political reality was clear. In Europe the economic picture is more mixed. The ECB has stated its desire to normalise monetary policy although determining what that is at the current juncture is incredibly difficult. Europe has not had the same level of fiscal stimulus as the US, or to a lesser degree the UK, and inflation has been predominantly driven by supply side factors. Medium to long term inflation expectations remain well anchored and the prospect of excessive wage growth seems unlikely given the slack in the economy. Yet the ECB continues to ratchet up its tightening rhetoric and risks making a policy mistake. The spread between German bunds and the periphery has widened and consequently monetary policy is not being transmitted equally across the continent.

Cyclicals rallied as investors took comfort from the resilience of corporate earnings. Automotive/industrial exposed names Jost Werke and TI Fluids responded positively. Brick producer, Forterra, rose as a trading update revealed that trading had been resilient and that profit for the current year would be materially ahead of expectations. The company’s new Desford facility will come on stream late next year resulting in a step up in profitability. The small holding in software company, ActiveOps, was the worst performer.

Trading activity was limited.

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 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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0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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