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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£15.9m

Data as at 31/03/2021.

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.

Alphabet7.9
Microsoft7.2
SK Hynix5.6
Synthomer4.6
Hitachi4.2
Denka3.7
Entain4.8
Ryanair 4.0
Visa3.3
Uniphar4.7
Roche Holdings2.9
Bristol-Myers Squibb2.0
Jadestone Energy2.6
Pantheon Resources1.0
Savannah Energy0.8
Prudential4.1

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 (%)

Alphabet7.9
Microsoft7.2
SK Hynix5.6
Micron Technology5.6
MagnaChip Semiconductor5.6
Entain4.8
Uniphar4.7
Synthomer4.6
Hitachi4.2
Prudential4.1
Rest of Portfolio45.9

Source: SVM, as at 31/03/2021

Sector Exposure (%)

Information Technology34.8
Health Care13.8
Industrials11.8
Communication Services10.3
Consumer Discretionary10.1
Materials8.2
Energy4.4
Financials4.1

Source: SVM, as at 31/03/2021

Size Analysis (%)

Mega Cap (>£50bn)37.3
Large Cap (<£50bn)14.4
Mid Cap (<£10bn)23.6
Small Cap (<£1bn)22.5

Source: SVM, as at 31/03/2021

Geographic Analysis (%)

North America36.4
United Kingdom35.4
Europe (excluding UK)11.6
Asia Pacific (excluding Japan)6.4
Japan7.8

Source: SVM, as at 31/03/2021

Currency Exposure (%)

Euro8.7
Sterling35.7
Europe non-Euro2.9
US Dollar38.9
Japanese Yen7.8
Others6.4

Source: SVM, as at 31/03/2021

Show piebar chart

This Month's Featured Stock

Menzies

John Menzies (‘Menzies’) is a global provider of aviation services. The group provides ground handling, into-plane fuelling and cargo services.

The Covid pandemic has had a significant impact on Menzies. Revenues declined by 38% as flight volumes declined around the world. While the cargo business was helped by strong air freight rates, this failed to offset pressures elsewhere. In the toughest operating environment the business has ever faced, Menzies demonstrated impressive resilience. Management swiftly secured the group’s liquidity position and renegotiate banking covenants. Albeit with some government support, Menzies finished the year with a lower net debt position than where it entered. Steps to improve the group’s operational and commercial performance also stand the group in good stead for future growth.

While there will be exits from the airline industry, those remaining will look to focus on core competencies and reduce fixed costs. Therefore, the trend towards outsourcing of flight services (c.50% remains insourced globally) should continue and help sustain longer-term structural growth. In 2020 Menzies made £40m net revenue gains through winning commercial contracts, double that achieved in the prior year. In the first quarter of 2021 alone, they have won £20m of new work. Menzies has also taken out £20m of costs during 2020 which management believe will be permanent in nature. This should be reflected in improved operating margins.

While short-term earnings will remain volatile, we believe that Menzies remains significantly undervalued on a ‘normalised’ basis. The group trades on an estimated 2023 EV/EBITDA of less than 4x, a discount to historic levels and previous take-out multiples in the sector.

Performance

Performance (%)

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FundIndex
1 month3.72.9
2021 YTD11.03.3
1 year54.040.8
3 years57.744.8
5 years102.790.7
Since launch*223.8193.2
Source: Lipper, as at 31/03/2021, 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
446.40p
0.38%
Class B
500.50p
0.38%

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

Source: State Street, as at 22/04/2021.

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 +3.7% versus +4.0% for the MSCI ACWI IMI 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 largest contributor to fund performance was Magnachip Semiconductor. The Korean semiconductor business announced that it was being acquired by a private equity fund at a significant premium. The shares have been stellar performers and the takeout price is almost three times our book cost. The fundamentals of the semiconductor sector are compelling, and we remain positive on both Micron and SK Hynix.

Consumer cyclical stocks performed well as investors looked forward to the reopening of the economy. 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.

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. Management have done an excellent job navigating the business through the crisis and it is in a far stronger position coming out than it was going in.

The fund’s energy holdings were generally weaker as the oil price retreated. Jadestone Energy fell as investors continued to digest the implications of the recent update. While some short-term disappointment is understandable, the resilience of the group’s financial and operating performance is underappreciated.

New positions were initiated in Bristol Myers and John Menzies. The fund participated in the IPO of operational software business, ActiveOpps.

Commentary by
Neil Veitch
Global & UK Investment Director
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 +3.7% versus +4.0% for the MSCI ACWI IMI 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 largest contributor to fund performance was Magnachip Semiconductor. The Korean semiconductor business announced that it was being acquired by a private equity fund at a significant premium. The shares have been stellar performers and the takeout price is almost three times our book cost. The fundamentals of the semiconductor sector are compelling, and we remain positive on both Micron and SK Hynix.

Consumer cyclical stocks performed well as investors looked forward to the reopening of the economy. 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.

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. Management have done an excellent job navigating the business through the crisis and it is in a far stronger position coming out than it was going in.

The fund’s energy holdings were generally weaker as the oil price retreated. Jadestone Energy fell as investors continued to digest the implications of the recent update. While some short-term disappointment is understandable, the resilience of the group’s financial and operating performance is underappreciated.

New positions were initiated in Bristol Myers and John Menzies. 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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