Threadneedle Global Select Fund

Transcription

1 Interim Short Report 7 September 2018 Fund Manager s Report William Davies Performance of Class 1 Accumulation shares* Over the six months to 7 September 2018, the published of the has risen from p to p. Looking at the sterling performance within its peer group, the total return on the fund for the six months ending 31 August 2018, including net reinvested income, is +8.48% as compared to a median return of +8.23% over the same period. (For information the MSCI AC World Free Index returned +8.63% over the same period). Market Overview and Portfolio Activity In the six months to 7 September 2018, global equities rose in local currency terms. Markets were swayed at various stages by rising trade tensions between the US and China, with investors pricing in the potential implications for global growth. This meant market volatility remained high relative to the smooth backdrop seen in US equities led returns amid signs of domestic economic resilience. Central to this was a wave of upbeat corporate earnings, strong employment data and the continued outperformance of the country s technology giants. Nascent inflation led the Federal Reserve to continue its course of rate hikes during the period; a trend widely expected to persist in the coming quarters. European equities started the period strongly but were later weighed by political turbulence as investors worried that the formation of an Italian eurosceptic coalition could impact eurozone stability. Fears over contagion from Turkey s currency crisis extended this downward trend later in the period. Japanese equities experienced rotations in light of fluctuating global growth prospects. UK equities staged a resurgence early on as increased takeover activity, the country s relatively high commodities exposure and sterling weakness bolstered sentiment. Thereafter, they tracked gradually downwards as the lack of progress in the Brexit negotiations persisted. Elsewhere, emerging markets were pressured by Brazilian politics, the Turkish lira s depreciation and China s trade tensions. However, the Chinese market gained in the run-up to the inclusion of its A-shares in the MSCI Emerging Markets index. By contrast, Indian equities outperformed, supported by robust inflows from foreign investors. During the period, Microsoft was our largest new position. Cloud computing remains one of the strongest structural trends driving markets, and Microsoft s platform should ensure it remains a long-term beneficiary of generational business migration into this space. Its large distribution channels and installed customer base continue to act as sustainable *In pound Sterling and against UK peer group. competitive advantages. We also bought sports equipment manufacturer Adidas, which continues to gain market share in a relatively concentrated industry. The arrival of well-regarded management from Henkel is promising, given their success in improving margins in their previous role. Other purchases included internet connection specialist Equinix. The company s superior brand and premium market position generates pricing power, while its multi-region footprint drives its appeal for customers with more expansive requirements. We also initiated a holding in global medical technology company Becton Dickinson, switching in from Dentsply Sirona. With a diversified portfolio, high market share, and its recent acquisition of Bard, we believe Becton can deliver accelerations in top-line growth and margin expansion. The company retains a competitive cost advantage and is also supported by switching costs. Smaller new positions during the period included oilfield services company Schlumberger, Japanese factory automation equipment specialist Keyence and ophthalmic lens manufacturer Essilor. We believe the latter stands to benefit from the structural growth in eyewear and synergies from its acquisition of Luxottica, given their respective positions as leading lens and frame manufacturers. To fund these, our sales included: Deutsche Telekom, premised on the stock s price recovery and the company s increasing reliance on US earnings growth; and financial services provider UBS, as we believe the company s capital return story may take longer than anticipated to materialise. Following a strong run of performance, and with concerns over departures of senior executives, we also exited Nike. Additionally, we sold out of Japanese heavy equipment manufacturer Kubota. We believe preferable long-term opportunities now exist elsewhere when taking into account the increasing competitive intensity of the company s small tractor segment. Other sales included biopharmaceutical company Pfizer, industrial automation leader Yaskawa Electric and US domestic bank BB&T. Having seen these names approach their price targets on strong performance, we elected to reallocate to names that we feel carry greater upside potential. Volatility within equity markets remains somewhat elevated relative to recent periods, as uncertainties surrounding rising interest rates, tariffs, and technological regulation remain in focus. While these risks are real and have the potential to curtail valuation multiples, we draw confidence from the fact that equity fundamentals continue to look robust. Economic growth remains well-entrenched across developed and emerging markets, and this is driving healthy corporate earnings. Within this context, we retain our focus on companies with sustainable competitive advantages, reflected by high or rising returns on capital and the potential to compound earnings over time. We believe that companies exhibiting these qualities are best-placed to outperform across a range of market conditions; offering durable, aboveaverage growth in rising markets and resilience in more turbulent periods. Fund Facts Fund Accounting and Distribution Dates Accounting Dates Payment Dates 7 March 7 May Ongoing Charges Figure The Ongoing Charges Figure (OCF) is the European standard method of disclosing the charges of a share class of a fund based on the financial year s expenses and may vary from year to year. It includes charges such as the fund s annual management charge, registration fee, custody fees and distribution cost but ordinarily excludes the costs of buying or selling assets for the fund (unless these assets are shares of another fund). Where published, the Key Investor Information Document (KIID) contains the current OCF. For a more detailed breakdown please visit columbiathreadneedle.com/fees. Share class 7 September March 2018 Class 1 Accumulation shares 1.63% 1.67% Class 1 EUR Accumulation shares % Class 1 USD Accumulation shares % Class 2 Accumulation shares 1.07% 1.06% Class 2 EUR Accumulation shares % Class 2 USD Accumulation shares % Class X Accumulation shares 0.06% 0.06% Class Z Income shares 0.85% 0.88% Class Z Accumulation shares 0.85% 0.88% Class Z USD Accumulation shares % The Ongoing Charges Figure is annualised based on the fees incurred during the accounting period or since commencement date. 1 Commenced 15 June 2018.

2 Summary of Fund Performance Performance History (%) Share class Class 1 Accumulation shares Class 1 EUR Accumulation shares Class 1 USD Accumulation shares Class 2 Accumulation shares Class 2 EUR Accumulation shares Class 2 USD Accumulation shares Class X Accumulation shares Class Z Income shares Class Z Accumulation shares Class Z USD Accumulation shares To 31 August Commenced 15 June Commenced 27 March Source: Morningstar and Threadneedle. Bid to bid prices are quoted (i.e. not including any initial charge) with net income reinvested for a UK basic rate tax payer and gross income reinvested for a non-uk resident. Performance data is quoted in sterling, apart from hedged share classes, where applicable, which are in the hedged currency. Past performance is not a guide to future investment performance. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. Net Asset Value (NAV) As at Share class NAV ( ) NAV pence per share Number of shares in issue 7 September 2018 Class 1 Accumulation shares 403,615, ,391,701 7 March 2018 Class 1 Accumulation shares 560,882, ,918,033 7 March 2017 Class 1 Accumulation shares 591,006, ,300,372 7 March 2016 Class 1 Accumulation shares 492,951, ,895,484 7 September 2018 Class 1 EUR Accumulation shares 31,365, ,707,650 7 September 2018 Class 1 USD Accumulation shares 161,951, ,777,246 7 September 2018 Class 2 Accumulation shares 33,770, ,257,684 7 March 2018 Class 2 Accumulation shares 137,407, ,556,195 7 March 2017 Class 2 Accumulation shares 110,658, ,955,964 7 March 2016 Class 2 Accumulation shares 315,238, ,193,486 7 September 2018 Class 2 EUR Accumulation shares 85,466, ,960,021 7 September 2018 Class 2 USD Accumulation shares 61,090, ,555,861 7 September 2018 Class X Accumulation shares 272,606, ,392,540 7 March 2018 Class X Accumulation shares 288,260, ,581,526 7 March 2017 Class X Accumulation shares 275,415, ,896,369 7 March 2016 Class X Accumulation shares 3, ,001 7 September 2018 Class Z Income shares 1,458, ,207 7 March 2018 Class Z Income shares 1,320, ,020 7 March 2017 Class Z Income shares 974, ,028 7 March 2016 Class Z Income shares 730, ,535 7 September 2018 Class Z Accumulation shares 193,719, ,562,509 7 March 2018 Class Z Accumulation shares 216,487, ,407,726 7 March 2017 Class Z Accumulation shares 166,242, ,441,919 7 March 2016 Class Z Accumulation shares 204,447, ,656,944 7 September 2018 Class Z USD Accumulation shares 27,848, ,725,180 Distribution History/Share Price Range Highest Lowest Year to Share class Pence per share 7 September 2018 Class 1 Accumulation shares March 2018 Class 1 Accumulation shares March 2017 Class 1 Accumulation shares March 2016 Class 1 Accumulation shares September 2018 Class 1 EUR Accumulation shares

3 Highest Lowest Year to Share class Pence per share 7 September 2018 Class 1 USD Accumulation shares September 2018 Class 2 Accumulation shares March 2018 Class 2 Accumulation shares March 2017 Class 2 Accumulation shares March 2016 Class 2 Accumulation shares September 2018 Class 2 EUR Accumulation shares September 2018 Class 2 USD Accumulation shares September 2018 Class X Accumulation shares March 2018 Class X Accumulation shares March 2017 Class X Accumulation shares March 2016 Class X Accumulation shares September 2018 Class Z Income shares March 2018 Class Z Income shares March 2017 Class Z Income shares March 2016 Class Z Income shares September 2018 Class Z Accumulation shares March 2018 Class Z Accumulation shares March 2017 Class Z Accumulation shares March 2016 Class Z Accumulation shares September 2018 Class Z USD Accumulation shares Commenced 15 June Past performance is not a guide to future performance. Classification of Investments 7 September 2018 vs 7 March % 60% 7 September March % 40% 30% 20% 10% 0% United States of America United Kingdom Cayman Islands Republic of Ireland Japan Switzerland Germany China Indonesia India Canada Netherlands Hong Kong Bermuda France Belgium Spain Denmark Jersey Thailand Mexico Net other assets Portfolio Information Top Five Holdings as at 7 September 2018 % of Fund Alphabet Class A 3.98 Amazon.com 3.78 Microsoft 2.92 JPMorgan Chase 2.91 Illumina 2.85 Top Five Holdings as at 7 March 2018 % of Fund Alphabet Class A 3.73 Alibaba Group ADR 3.27 Amazon.com 3.22 JPMorgan Chase 3.02 Bank of America 2.58

4 Investment Objective and Policy To achieve above average capital growth. The ACD s investment policy is to invest the assets of the Fund primarily in equities issued by companies worldwide. The portfolio may be concentrated geographically or with respect to stock and sector positions, which may lead to increased levels of volatility. If the ACD considers it desirable, it may further invest in other securities (including fixed interest securities, other equities and money market securities). Key Investor Information Document (KIID) Subscription requirements The KIID is a pre-contractual document and investors have to confirm that they have read the latest KIID before making a subscription. Threadneedle has the right to reject a subscription if the investor does not confirm that they have read the latest KIID at the time of application. Investors can obtain the latest KIID from columbiathreadneedle.com. Changes to the management of the ACD The following changes have been made to the directors of the ACD: Resignation of Don Jordison on 1 May Appointment of Peter Stone on 5 September Changes to the Prospectus During the period from 8 March 2018 to 7 September 2018 the following changes were made to the Prospectus of the Threadneedle Investment Funds ICVC (the Company): Inclusion of information about the use of Hong Kong Stock Connect by certain funds; Updated privacy statement for GDPR; Inclusion of a note regarding the winding up of four sub-funds following successful votes in favour of cross-border mergers; Increase to the initial investment minimum for L Shares; Update to the list of funds managed by the ACD; Update to the list of countries where the funds are registered; Update to the list of available share classes, including deletion of a hedged share class for the European Fund; General updates (taxation, dilution, performance, etc). Changes to the Instrument of Incorporation There were no changes to the instrument of incorporation of the Company during the period from 8 March 2018 to 7 September Brexit In June 2016 the United Kingdom voted to leave the European Union. This is known as Brexit. While negotiations progress, there is significant uncertainty relating to the UK s withdrawal from the EU, the potential consequences and precise timeframe. It is expected that the UK will exit from the EU on 29 March Depending on the outcome of the UK s negotiations with the European Union, and the existence or otherwise of any formal implementation period, it is possible that the Funds may no longer be eligible to enjoy the rights set out in the UCITS Directive. Ceasing to be so eligible may affect the ability of non-uk domiciled investors to make new investments in the Company. The ACD has considered the impact of Brexit for investors in its funds and made a recommendation to investors in the European Corporate Bond Fund, European High Yield Bond Fund, Pan European Fund and Pan European Smaller Companies Fund that they should vote in favour of a resolution to transfer the funds, using a cross-border UCITS merger, to an equivalent Luxembourg-based fund, in order to provide continuity and certainty for investors. For EU investors, the transfers will remove uncertainty regarding the future status of their investment in their home country. Shareholders voted in favour of the proposal at a meeting of shareholders held on 24 August Following the mergers, which took place on the dates as set out in the table below, the European Corporate Bond Fund, European High Yield Bond Fund, Pan European Fund and Pan European Smaller Companies Fund closed and are now in the process of being wound up. Further information, including a Q&A document is available at Fund Date of Merger European Corporate Bond Fund 22 September 2018 European High Yield Bond Fund 6 October 2018 Pan European Fund 6 October 2018 Pan European Smaller Companies Fund 6 October 2018 Key Risks Investment Risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. Currency Risk: Where investments are in assets that are denominated in multiple currencies, or currencies other than your own, changes in exchange rates may affect the value of the investments. Effect of Portfolio Concentration Risk: The Fund has a concentrated portfolio (holds a limited number of investments and/or has a restricted investment universe) and if one or more of these investments declines or is otherwise affected, it may have a pronounced effect on the fund s value. Derivatives for EPM/Hedging Risk: The investment policy of the fund allows it to invest in derivatives for the purposes of reducing risk or minimising the cost of transactions. Volatility Risk: The fund may exhibit significant price volatility. Further risks applicable to the fund can be found in the Prospectus. Risk and Reward Profile As at 7 September 2018 the figure for the risk and reward profile disclosed in the most recent KIID representing this fund is 5. The fund is in this specific category because historically it has shown a medium to high level of volatility (how much the value of the fund went up and down compared to other categories). It is based on past performance data in pound sterling. If your investment in the fund is not in pound sterling, please check the figure for the risk and reward profile disclosed on our website (columbiathreadneedle.com) according to the currency of your investment in the fund.

5 General Information The information in this report is designed to enable shareholders to make an informed judgement on the activities of the fund during the period it covers and the results of those activities at the end of the period. For further information, please contact Threadneedle Investment Services Limited. The Long Form Report and Financial Statements is available free of charge on request from the ACD and on our website. For more information about the activities and performance of the Company during the period and previous periods, please contact the ACD at the administration address noted below, or visit our website at columbiathreadneedle.com. Contacts: Registered Office Cannon Place 78 Cannon Street London EC4N 6AG Authorised Corporate Director (ACD) Threadneedle Investment Services Limited Cannon Place 78 Cannon Street London EC4N 6AG Registrar Threadneedle Investment Services Limited Delegated to: DST Financial Services Europe Limited (Authorised and regulated by the Financial Conduct Authority (FCA)) St Nicholas Lane Basildon Essex SS15 5FS Investment Manager Threadneedle Asset Management Limited Cannon Place 78 Cannon Street London EC4N 6AG Authorised Corporate Director Client Services Details UK Investors Address: Threadneedle Investment Services Limited PO Box Chelmsford Essex CM99 2AL Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): Asian Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): *Calls will be recorded. All Other Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): Website: columbiathreadneedle.com Depositary Citibank Europe plc, UK branch (Authorised by the Prudential Regulatory Authority (PRA) and regulated by the FCA and PRA) Citigroup Centre 33 Canada Square Canary Wharf London E14 5LB Legal Advisers Eversheds LLP One Wood Street London EC2V 7WS Baum Financial Services Law Team Grosser Burstah Hamburg Germany Independent Auditor PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX Paying and Information Agent in Belgium CACEIS Belgium S.A. Avenue du Port 86C B Brussels Belgium Representative and Paying Agent in Switzerland BNP Paribas Securities Services, Paris, Succursale de Zurich Selnaustrasse Zurich Switzerland

6 To find out more visit columbiathreadneedle.com Threadneedle Investment Services Limited, ISA Manager, Authorised Corporate Director and Unit Trust Manager. Registered No Registered in England and Wales. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. columbiathreadneedle.com