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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£19.2m

Data as at 31/03/2021.

Fund Managers

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

Hugh Cuthbert
European Investment Manager
15
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.

Synthomer5.5
Smurfit Kappa Group5.2
Rexel4.5
Forterra4.3
Alpha FMC4.1
Prudential5.5
AXA4.6
Lloyds Banking Group 4.1
OSB Group3.9
Allianz3.8
Norcros6.4
Jost Werke3.7
Vistry Group2.8
Tesco 2.4
Nordic Entertainment Group1.9
Uniphar5.0
DCC3.3
Roche Holdings2.4
Creo Medical Group3.9
Koninklijke Philips2.4
ActiveOps1.2

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 (%)

Norcros6.4
Synthomer5.5
Prudential5.5
Smurfit Kappa Group5.2
Uniphar5.0
AXA4.6
Rexel4.5
Forterra4.3
Alpha FMC4.1
Lloyds Banking Group 4.1
Rest of Portfolio50.8

Source: SVM, as at 31/03/2021

Sector Exposure (%)

Industrials28.5
Financials21.9
Materials20.9
Health Care13.7
Consumer Discretionary6.2
Information Technology4.1
Consumer Staples2.4
Communication Services1.9

Source: SVM, as at 31/03/2021

Size Analysis (%)

Mega Cap (>€50bn)6.3
Large Cap (<€50bn)25.9
Mid Cap (<€10bn)34.6
Small Cap (<€1bn)32.6

Source: SVM, as at 31/03/2021

Geographic Analysis (%)

Other0.0
UK61.4
France11.9
Ireland10.1
Germany9.4
Switzerland2.4
Netherlands2.4
Sweden1.9

Source: SVM, as at 31/03/2021

Currency Exposure (%)

Euro37.9
Sterling57.3
Swiss Franc2.4
Swedish Krona1.9

Source: SVM, as at 31/03/2021

Show piebar chart

This Month's Featured Stock

CRH

It is at this time of year we eagerly await disclosure from our investee companies regarding their environmental performance in the previous year. Irish building materials and products company CRH has been of particular interest to us as the highest emitter of CO2in our fund as a result of its prominent position in the market for cement production. The company’s Corporate Social Responsibility Report was published on the 26th March which we have scrutinised to assess the progress they have made on emissions reduction with an eye to further engagement on this important topic. Our analysis raises a number of questions which we will put to the company over the coming weeks.

First the good news. The company does appear committed to a reduction in carbon with a host of measures including a target of 33% less CO2per KG of cement produced by 2030. There is also a commitment to net zero emissions by 2050 and all this is enhanced by the targets being officially science based which adds an element of credibility to their ambitions. The report also lists a host of initiatives being undertaken including the use of alternative, more environmentally friendly raw materials as well as renewable energy sources.

But for us this news is overshadowed by the company’s overall environmental performance in 2020 not least the fact that group emissions in fact increased from 1.2kg CO2 per $ of revenue in 2019 to 1.3kg in 2020 a greater than 8% year on year increase.

While setting of long-term environmental targets clearly have an important role to play, there can be numerous management changes in the intervening period making short term performance an equally important measure and something we will soon be addressing with CRH.

Performance

Performance (%)

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FundIndex
1 month7.44.6
2021 YTD10.93.3
1 year58.930.9
3 years24.622.1
5 years60.559.1
Since launch*286.7141.9
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 31/10/2006.
FundIndexDifference
202158.930.9+28.0
2020-17.8-10.6-7.2
2019-4.74.3-9.0
20189.62.6+7.0
201717.627.0-9.4
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
363.40p
0.28%
Class B
405.40p
0.27%

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

Source: State Street, as at 21/04/2021.

Commentary

Equities made further progress over the month despite mixed Covid news. Tensions over vaccines remain and many parts of Europe are entering further lockdowns. Further wrangling over the safety profile of the Astra/Oxford vaccine risks undermining vaccination efforts in Europe and elsewhere. Infection rates also continue to rise in places such as India and Brazil where it had been thought there was a reasonable element of herd immunity. In spite of such concerns, investors continued to focus on the bigger picture: the vaccine roll-out is ongoing and recent economic data has highlighted the scope for a significant acceleration in economic activity. The fund gained +7.4% versus +4.6% for the MSCI Europe Index.

Economic activity continued to rebound across the globe. Hiring is picking up aggressively and there is little evidence that either business or consumers have been significantly scarred by the pandemic. House prices in the US and elsewhere are rising at the fastest rate since the global financial crisis. President Biden’s stimulus was passed by US lawmakers and Europe is moving ahead with its recovery fund despite an attempted intervention by the German constitutional court. With monetary policy also extremely supportive, economic and profit forecasts for the next twelve to eighteen months look unduly conservative.

The fund’s consumer cyclical stocks performed well as investors looked forward to the reopening of the economy. Many of them were buoyed by strong updates. Bathroom and kitchen supplier, Norcros, even managed to release two positive trading updates in just one month. These resulted in the house broker raising forecasts for over 30% for the current year to the end of April and over 20% for the following year. Importantly, the impressive profit performance has been mirrored by the group’s cash generation and the business will be in a net cash position at year-end, providing significant scope for further acquisitions. Norcros has successfully acquired and integrated a number of smaller suppliers over the last couple of years and these acquisitions have generated material revenue synergies. As long-term shareholders, we look forward to the benefits of further acquisitions. Despite the management’s impressive track record the shares continue to languish at a material discount to both the sector and the market.

Vistry delivered full-year results that confirmed the strength of the ongoing recovery in the housebuilding division and strength in the partnerships business. In the twelve months since it acquired Linden Homes and the Partnerships & Regeneration business from Galliford Try, the group has made excellent progress in integrating the businesses and reducing debt. Management’s confidence in the outlook for the business was evidenced by significant share purchases by the CEO, Greg Fitzgerald.

Volution rose post impressive full-year results. Revenue grew at high-single digits in constant currency and adjusted profits grew in excess of 20%. Despite the sharp move in the share price over the last six months we believe there is further upside. Ventilation and air handling are of increasing importance in both new build and refurbished properties and look set to deliver robust growth for many years. Aviation services provider, Menzies, climbed as investors anticipated the resumption of air travel. The group’s full year results provided further evidence of improved operational delivery. Costs have been cut and new contracts signed.

There were no significant decliners. The fund participated in the IPO of operational software business, ActiveOpps.

Commentary by
Neil Veitch
Global & UK Investment Director
Hugh Cuthbert
European Investment Manager
As at 31/03/2021.

Equities made further progress over the month despite mixed Covid news. Tensions over vaccines remain and many parts of Europe are entering further lockdowns. Further wrangling over the safety profile of the Astra/Oxford vaccine risks undermining vaccination efforts in Europe and elsewhere. Infection rates also continue to rise in places such as India and Brazil where it had been thought there was a reasonable element of herd immunity. In spite of such concerns, investors continued to focus on the bigger picture: the vaccine roll-out is ongoing and recent economic data has highlighted the scope for a significant acceleration in economic activity. The fund gained +7.4% versus +4.6% for the MSCI Europe Index.

Economic activity continued to rebound across the globe. Hiring is picking up aggressively and there is little evidence that either business or consumers have been significantly scarred by the pandemic. House prices in the US and elsewhere are rising at the fastest rate since the global financial crisis. President Biden’s stimulus was passed by US lawmakers and Europe is moving ahead with its recovery fund despite an attempted intervention by the German constitutional court. With monetary policy also extremely supportive, economic and profit forecasts for the next twelve to eighteen months look unduly conservative.

The fund’s consumer cyclical stocks performed well as investors looked forward to the reopening of the economy. Many of them were buoyed by strong updates. Bathroom and kitchen supplier, Norcros, even managed to release two positive trading updates in just one month. These resulted in the house broker raising forecasts for over 30% for the current year to the end of April and over 20% for the following year. Importantly, the impressive profit performance has been mirrored by the group’s cash generation and the business will be in a net cash position at year-end, providing significant scope for further acquisitions. Norcros has successfully acquired and integrated a number of smaller suppliers over the last couple of years and these acquisitions have generated material revenue synergies. As long-term shareholders, we look forward to the benefits of further acquisitions. Despite the management’s impressive track record the shares continue to languish at a material discount to both the sector and the market.

Vistry delivered full-year results that confirmed the strength of the ongoing recovery in the housebuilding division and strength in the partnerships business. In the twelve months since it acquired Linden Homes and the Partnerships & Regeneration business from Galliford Try, the group has made excellent progress in integrating the businesses and reducing debt. Management’s confidence in the outlook for the business was evidenced by significant share purchases by the CEO, Greg Fitzgerald.

Volution rose post impressive full-year results. Revenue grew at high-single digits in constant currency and adjusted profits grew in excess of 20%. Despite the sharp move in the share price over the last six months we believe there is further upside. Ventilation and air handling are of increasing importance in both new build and refurbished properties and look set to deliver robust growth for many years. Aviation services provider, Menzies, climbed as investors anticipated the resumption of air travel. The group’s full year results provided further evidence of improved operational delivery. Costs have been cut and new contracts signed.

There were no significant decliners. The fund participated in the IPO of operational software business, ActiveOpps.

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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