Periods Ending September 30, MSCI ACWI Small Cap Benchmark

Transcription

1 Cumulative Excess Return % Return % Global Small Cap Quarterly Review Composite Performance Periods Ending September 30, 2018 At A Glance Inception: April 1, : MSCI ACWI Small Cap AUM: $26.61 million Qtr 3 1 Year Since Inception Global Small Cap Gross of Fees Global Small Cap Net of Fees MSCI ACWI Small Cap Inception date: April 1, The value of investments can fluctuate. Data assumes reinvestment of dividends and capital gains. Data reflects past performance. Past performance does not guarantee future results. Periods greater than one year have been annualized. Quarterly Top Relative Contributors and Detractors Contributor Detractor Bottomline Technologies De Inc 0.59 Tateru Inc Teladoc Health Inc 0.42 Optinose Inc Mercury Systems Inc 0.39 Wisdom Education International Holdings Co Ltd PetIQ Inc 0.39 GDS Holdings Ltd Burford Capital Ltd 0.30 Ichikoh Industries Ltd Attribution Analysis One Year Ending September 30, Sector Allocation Security Selection Currency Effect Total Effect

2 Investing With a Time-Tested Growth Philosophy We believe that accelerating growth in revenues and earnings results in significant potential for stock price appreciation. markets are inefficient at identifying such points. Our process is designed to uncover stocks that outperform as earnings growth accelerates, market expectations rise and multiples expand. Goal Seeks to outperform the MSCI ACWI Small Cap by 3% to 4% annualized over a market cycle. Risk Guidelines Maximum position size: 3% active weight Regional exposure: +/- 10% of benchmark weight Sector exposure: +/- 10% of benchmark weight Emerging markets exposure: +/- 10% of benchmark weight Expected tracking error: 6% to 8% versus benchmark Investment Process Investment Universe Market Capitalization: small cap as defined by MSCI (represents the bottom 15% capitalization of each country as defined by MSCI) Sufficient trading liquidity 1 2 Fundamental 3 Idea Generation Identify companies exhibiting accelerating growth and improving fundamentals Fundamental information flow Quantitative screens Analysis Confirm acceleration is genuine and sustainable Construction Focus portfolio on best ideas Monitor risk controls and guidelines Companies 2

3 Characteristics Characteristics Weighted Average Market Capitalization $3.0 B $2.9 B Median Market Capitalization $2.3 B $0.7 B Price To Earnings Ratio, Historical 1 Year 31.5x 16.6x Price To Earnings Ratio, Forecasted 1 Year 27.0x 16.9x EPS Growth, Historical 1 Year 25.2% 21.0% EPS Growth, Forecasted 1 Year 27.3% 16.8% Number of Holdings Number of Countries % Cash 0.8% 0.0% Forecasts are not a reliable indicator of future performance. Investment Team Managers - Trevor Gurwich - Federico Laffan Client Managers - Nathan Chaudoin - Bernard Chua, CFA - Laura Granger, CFA - Jim Shore, CFA 8 Investment Analysts Located in New York Top 10 Holdings Holding Country Industry Assets Bottomline Technologies DE Inc US Software 1.97 Kinsale Capital Group Inc US Insurance 1.71 AVEVA Group PLC UK Software 1.60 Cavco Industries Inc US Household Durables 1.41 Hamilton Lane Inc US Capital Markets 1.36 Hikma Pharmaceuticals PLC UK Pharmaceuticals 1.33 Mercury Systems Inc US Aerospace & Defense 1.30 Chart Industries Inc US Machinery 1.17 Aker BP ASA Norway Oil, Gas & Consumable Fuels 1.13 Royal Unibrew A/S Denmark Beverages 1.11 Total 14.10% Top 10 Overweights Holding Weight Weight Overweight Bottomline Technologies DE Inc Kinsale Capital Group Inc AVEVA Group PLC Cavco Industries Inc Hamilton Lane Inc Hikma Pharmaceuticals PLC Mercury Systems Inc Chart Industries Inc Aker BP ASA PlayAGS Inc Equity holdings are grouped to include common shares, depository receipts, rights and warrants issued by the same company. holdings subject to change without notice. 3

4 Sector Allocation Weight vs Sector Health Care Information Technology Consumer Discretionary Consumer Staples Energy Telecommunication Services Financials Utilities Industrials Materials Real Estate % Quarterly Sector Performance Contribution to Return vs Sector Contribution to Return Contribution to Return Health Care Financials Information Technology Materials Consumer Staples Consumer Discretionary Industrials Utilities Telecommunication Services Energy Real Estate When shown, "Diversified" includes portfolio holdings that cannot be attributed to a specific GICS sector. % 4

5 Country Allocation: Top 10 Over/Underweights Weight vs. Country % United States United Kingdom Canada Switzerland Spain Netherlands Australia Italy Denmark South Korea Brazil South Africa France Finland Singapore Israel Taiwan Sweden Germany Japan Quarterly Top Relative Contributors and Detractors by Country Contributor United States 2.97 United Kingdom 0.71 Taiwan 0.26 Netherlands 0.16 Switzerland 0.12 Detractor Japan China South Korea Hong Kong Sweden

6 Percentile Rank Global Small Cap Risk-Adjusted Performance Since Inception (April 1, 2016) MPT Statistics vs. ea Global Small Cap Equity Universe vs. MSCI AC World Small Cap-ND, Citigroup 3-Month T-Bill 0 Excess Returns Tracking Error Information Ratio Sharpe Ratio 25 Median American Century Investments Global Small Cap Excess Returns Tracking Error Information Ratio Sharpe Ratio Manager Percentile Rank Median Source: evestment Analytics Excess returns are gross of fees. Number of products in the universe was 60. Available Vehicles Separate Account Available in U.S. and certain non-u.s. countries Collective Investment Trust Available only in U.S. Global Small Cap Fund I Share Class AGCSX Available only in U.S. R6 Share Class AGCTX Available only in U.S. Investor Share Class AGCVX Available only in U.S. 6

7 Quarterly Commentary Review U.S. pushed global stocks higher. Global small-cap stocks posted positive results as gains in the U.S., where growth and earnings were upbeat, generally offset weaker performance elsewhere. Global trade tensions, political concerns in select emerging markets, and slowing growth in China generally weighed on non-u.s. stocks. Emerging markets underperformed. Emerging markets stocks were particularly vulnerable to the geopolitical backdrop, rising U.S. - specific events also weighed on the asset class, which declined and lagged non-u.s. developed markets stocks, which increased modestly. Health care stocks were top contributors. The health care sector was a key contributor, largely due to stock selection in the health care providers and services industry. A position in pet health and wellness provider PetIQ rallied after the company said its revenues nearly doubled in the second quarter, aided by its continued store expansion. Financials sector contributed. Stock selection, particularly among capital markets companies and banks, aided the financials sector. A position in Burford Capital, a provider of financing and professional services for the global legal industry, was a key contributor, advancing on double-digit revenue and profits growth for the first half of Real estate sector detracted. Security selection weighed on relative results in the real estate sector, where Tateru, a supplier of cloud-based real estate marketing services, was a key detractor. Health care increased. We increased our position in the health care sector, where we found solid earnings growth opportunities amid improved pricing and new product launches. We reduced exposure to the materials sector, particularly in the chemicals industry, exiting KMG Chemicals after its announced acquisition by Cabot Microelectronics. North America was a top overweight. We increased our position in North America, as we found attractive stock-specific opportunities in the U.S. and Canada. We continued to underweight Asia, where we found fewer companies with accelerating earnings growth potential. Key Contributors Bottomline Technologies DE. The payments solutions provider reported better-than-expected results largely due to increased subscription and transaction revenues. In our view, the company is also benefiting from the secular trend toward digital business-tobusiness payments. Mercury Systems. The company supplies advanced technology for the aerospace and defense industry. Its stock surged higher after management reported strong quarterly revenue growth and increased bookings. Key Detractors Tateru. The supplier of cloud-based real estate marketing services based on falsified bank statements. Amid a wider investigation into other potential occurrences, and given near-term uncertainty for the stock, we exited the position. Optinose. Despite reporting better-than-anticipated quarterly earnings, the specialty pharmaceuticals company experienced stock price weakness as investors rotated away from smaller, earlierstage health care companies and rewarded more established, blue chip health care companies. Wisdom Education International. This private education company is capitalizing on growing demand for childhood educational services in China. proposed limiting the ability of private education companies to expand through acquisitions. We exited the position. Notable Trades Aker BP. We added a position in this oil exploration company, which owns high-quality assets on the North Sea Norwegian Continental Shelf. It benefits from a healthy balance sheet and highquality production resources. Callaway Golf. We initiated a position in this golf equipment and apparel manufacturer. We believe its earnings growth acceleration is sustainable due to successful global product launches, improvements in its golf ball business, and the potential for margin expansion. It is also benefiting from improving industry conditions and strong international growth. GDS Holdings. We sold our investment in this leading developer of advanced data centers in China. The stock declined after the addressed concerns around utilization rates, we were concerned about near-term uncertainty for the stock. Hotel Shilla. The stock of this operator of luxury hotels and dutyfree shops in South Korea fell on weak duty-free store sales and investor concerns about a more challenging competitive environment. The stock partially recovered after the company reported better-than-expected operating profits, and we exited our position. Teladoc Health. The company provides on-demand remote health care consultation through phone calls and videoconferencing. It reported robust quarterly performance, aided in part by higher feebased subscriptions and its integration of Advance Medical, a recent acquisition. 7

8 Positioning for the Future The portfolio continues to invest in companies where we believe fundamentals are strong and improving but share price performance does not fully reflect these factors. Our process is based on individual security selection, but broad themes have emerged. Health care was prominent overweight. We increased the opportunities among drugmakers and health care equipment and supply companies, primarily in Europe and Japan. Within the pharmaceuticals industry, we are particularly optimistic about pricing trends among generic drug manufacturers. Accordingly, we added a position in Sawai Pharmaceutical, a developer of generic drugs, including antibiotics, anticancer therapies, and circulatory medications. Information technology was a top overweight. The information technology sector remained a prominent overweight, as favorable capital spending trends are fueling earnings growth in several industries, including software and IT services. In the software industry, we added a position in Zynga, a developer and publisher of digital games for cellular devices, social media networks, and internet forums. We also added a position in IT services provider Afterpay Touch Group, a payment services company. and other emerging markets. Trade war fears and concerns about a resulting economic slowdown in China led to worries about consumer spending trends and earnings growth outlooks for select consumer-focused companies in developing markets. Real estate, materials were key underweights. The real estate sector was a key underweight, as we found few real estate companies offering the earnings growth potential we favor. In addition, rising interest rates continued to pressure property stocks. Similarly, we also found few companies in the materials sector offering robust earnings growth potential. Elsewhere, global trade tensions created earnings growth headwinds for select non-u.s. small-cap industrials companies, which prompted us to reduce the North America increased, emerging markets decreased. We increased exposure to North America, primarily in the U.S., where the upbeat economic backdrop continued to support corporate earnings growth. In particular, we found attractive opportunities among U.S. companies in the consumer discretionary, information technology, and health care sectors. Conversely, we reduced exposure to emerging markets, largely due to the effects trade war fears, rising U.S. interest rates, and adverse political and economic factors in specific developing countries are having on earnings growth outlooks. Consumer discretionary sector reduced. We decreased the remained a key overweight. We primarily exited positions in China 8

9 Composite returns are gross of investment management fees. Sector weights, portfolio characteristics and holdings are of a representative account in the composite. Holdings are current as of the date indicated, are subject to change and may not reflect the portfolio's current holdings. construction guidelines document operational policies and not necessarily investment restrictions imposed on management of the strategy. Material presented has been derived from industry sources considered to be reliable, but their accuracy and completeness cannot be guaranteed. Opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any American Century Investments portfolio. Nothing in this document should be construed as offering investment advice. Please note that this is for informational purposes only and does not take into account whether an investment is suitable or appropriate for a specific investor. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. For purposes of compliance with the Global Investment Performance Standards (GIPS tment Performance Standards (GIPS ). The Global Small Cap composite includes portfolios that invest primarily in the equity of small capitalization companies in developed markets that are demonstrating improving growth rates. Index futures (and currency forwards and futures, where applicable or appropriate) are occasionally used to equitize cash and manage portfolio risk. Other derivative instruments may be used, as allowed, as part of the investment strategy. Returns are calculated and stated in U.S. dollars. The return may increase or decrease as a result of currency fluctuations. Returns for periods less than one year are not annualized. To receive a complete list of composites and/or a GIPS compliant presentation, contact: American Century Investments 4500 Main Street Kansas City, MO Henrietta Street, 4th Floor London, WC2E 8LH United Kingdom Madison Avenue, 9th Floor New York, NY Suite 3201 Champion Tower 3 Garden Road, Central Hong Kong Charleston Road Mountain View, CA Macquarie Street Suite 1324 Sydney, NSW 2000, Australia Rosecrans Avenue Suite 4345 El Segundo, CA American Century Proprietary Holdings, Inc. All rights reserved. IM-FLY