M&G Global Themes Fund

Transcription

1 Quarterly Review M&G Global Themes Fourth quarter 18 manager Jamie Horvat FOR INVESTMENT PROFESSIONALS ONLY Highlights There was a broad sell-off in stockmarkets in the fourth quarter, with the US and Japan amongst the poorest performing major stockmarkets in local currency terms. Against this backdrop, the fund fell but outperformed the MSCI ACWI, with stock selection the principal contributor. Sector allocation had a smaller positive effect, with the fund s overweight in consumer staples adding value. After the quarter ended, on 1 January 19, Alex Araujo was appointed manager of the M&G Global Themes. Risks associated with this fund: For any past performance shown, please note that past performance is not a guide to future performance. The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested. s in currency exchange rates will affect the value of your investment. Further risk factors that apply to the fund can be found in the fund s Key Investor Information Document (KIID). Things you should know: The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash. Quarterly, YTD and single year performance 3 months YTD GBP A * Sector Quartile 1 1 Euro A * Sector Quartile 1 1 USD A * Sector Past performance is not a guide to future performance. Please note, not all share classes are necessarily available in all jurisdictions. 1 Source: Morningstar Inc., UK database, 31 December 18, Sterling I class shares, income reinvested, price to price. The fund s sterling I class shares launched on 3/8/1. Performance data shown prior to this date is that of the fund s sterling A share class. Sector: IA Global Source: Morningstar, Inc., Pan European database as at 31 December 18. Euro A class shares, income reinvested, price-to-price basis. Sector: Morningstar Global Equity** 3 Source: Morningstar, Inc., Pan European database as at 31 December 18. USD A class shares, income reinvested, price-to-price basis. Sector: Morningstar Global Equity** * On 17 November 17, the fund s performance comparator changed. Past performance shown to 1 November 17 is the FTSE Global Basics Composite (comprising all subsectors of the FTSE World except media, IT, telecommunications, financials and healthcare). Past performance shown from 17 November 17 is the MSCI ACWI. ** The Global Equity sector combines the following sectors: Morningstar Global Large-Cap Blend Equity sector; Morningstar Global Large-Cap Value Equity sector; Morningstar Global Large-Cap Growth Equity sector; Morningstar Global Small-Cap Equity sector; Morningstar Global Flex-Cap Equity sector; Morningstar Global Equity Income sector. AUST-Q-18

2 Performance attribution and positioning Largest positive contributors 3 months Largest positive contributors YTD Roche Holding Microsoft Polymetal International Yum! Brands Yum! Brands 3... ResMed Largest negative contributors 3 months Largest negative contributors YTD Schlumberger PZ Cussons Compass Minerals International Porsche Automobil Raytheon Schlumberger Source: Xamin, investment returns (gross of fees) calculated in sterling, as at 31 December 18, preliminary data. Performance contribution includes both stocks held and not held, and weighting shown is relative to MSCI ACWI. Largest overweights () Largest underweights () Roche Apple Microsoft Amazon Danone JP Morgan Yum! Brands Facebook Unilever Exxon Mobil Kerry Group Berkshire Hathaway Alphabet Pfizer.. -. DBS Nestle.. -. First Republic Bank... Unitedhealth Group.. -. AIA.8..5 Visa.. -. Country breakdown () Weights relative to index () US UK Germany Switzerland Canada France Hong Kong Ireland Other Cash US UK Germany Switzerland Canada France Hong Kong Ireland Other Cash AUST-Q-18 Industry breakdown () Consumer staples Healthcare Information technology Materials Financials Industrials Energy Communication services Consumer discretionary Utilities Real estate Cash and near cash Weights relative to index () Consumer staples Healthcare Information technology Materials Financials Industrials Energy Communication services Consumer discretionary Utilities Real estate Cash and near cash

3 Mega cap (> $5bn) Large cap ($1 - $5bn) Mid cap ($ - $1bn) Small cap (< $bn) Capitalisation breakdown () Cash Source of all portfolio data: M&G, as at 31 December 18. : MSCI ACWI. Weights relative to index () Mega cap (> $5bn) Large cap ($1 - $5bn) Mid cap ($ - $1bn) Small cap (< $bn) Cash commentary AUST-Q-18 As the quarter progressed, investors became increasingly concerned about the outlook for the world economy. The perception was that the combination of a trade war between the US and China and tighter monetary policy could stifle growth. During the quarter, the US Federal Reserve increased interest rates by a quarter of a point and the European Central Bank confirmed it was ending its asset purchases. On the other hand, the Bank of Japan continued with its policy of quantitative easing. In the commodity markets, the oil price fell on the expectation of weaker demand and a sense that planned output cuts by major producers were insufficient to allay concerns about oversupply. In the currency markets, the yen strengthened on the back of its perceived safe-haven status, whilst sterling weakened over fears over a hard Brexit. There was a broad sell-off in stockmarkets in the fourth quarter, with the US and Japan amongst the poorest performing developed markets in local currency terms. Conversely, European and emerging markets, whilst recording losses, fared somewhat better. As a result of the share price falls, several stockmarkets have hit, or nearly hit, bear market territory -- that is, they have fallen by or more from their peak. Against this backdrop, the fund fell in the quarter but outperformed the MSCI ACWI, with stock selection the principal contributor. Sector allocation had a smaller positive effect, with the fund s overweight in consumer staples adding value. The fund s top contributor was Switzerland-based pharmaceutical company Roche, one of the principal players in oncology. Roche reported 7 growth in sales for the first nine months of 18. The company is generating solid profit growth and is attractively valued, in our view. Other contributors included Polymetal and Yum! Brands. Precious metals business Polymetal is a recent addition to the portfolio. The company is a quality Russian name, which in our view benefits from good management. During the quarter, US fast food company Yum! Brands reaffirmed guidance for 19 and said that it expects net new store growth of about in. Conversely, energy holdings, including Sclumberger, detracted. Energy stocks fell heavily on the back of a sharp fall in the oil price in the fourth quarter. Schlumberger provides a range of services to exploration and production companies globally. Holdings in Compass Minerals and Raytheon also held back returns. Compass Minerals International is a US-listed company which is a leading producer of minerals, including salt, magnesium chloride, sulphate of potash and other plant nutrition products. Its share price declined after the company revised down full-year earnings estimates on the back of lower-than-expected production at its salt mine in Goderich, Ontario. Industrial exporters were out of favour during the quarter on continuing tension between the US and its trading partners and due to dollar strength. Caught up in the sell-off was defence contractor Raytheon, despite reporting better-thanexpected third-quarter results. 18 performance Over the year, stock selection, and to a lesser extent, sector allocation detracted from relative performance. Significant detractors included PZ Cussons, which reported tough trading in its core markets of the UK and Nigeria, and Porsche, whose shares fell on news that the US administration planned to impose trade tariffs on car imports from the EU. Shares in Schlumberger were down for the year on the back of the sharp drop in the oil price in the fourth quarter. Conversely, top contributors included Microsoft and Yum! Brands. Software giant Microsoft s results topped analysts estimates, with strong momentum in its commercial cloud business driving profitability. Yum! Brands has also reported strong operating performance.

4 A holding in ResMed, a manufacturer of products to diagnose, treat and manage respiratory disorders, also added value. In terms of sectors, the fund s overweight in materials held back relative returns, as did the underweight in technology. On the other hand the underweight in financials and overweight in healthcare added value. activity We aim to identify the companies that are set to benefit from long-term structural changes within economies, industries and societies. This is achieved through the analysis of global macroeconomics, demographics and government policies and spending, among other considerations. Our aim is to avoid investing in companies which operate in industries that are structurally challenged. In the fourth quarter, we were focusing on four main themes: health (the challenges and opportunities posed by an aging population); security (particularly cyber security and food security); infrastructure (the growing need for improved transport links); and environment (the increasing requirement for energy efficiency and pollution control). The stock selection process is designed to identify wellrun companies that are attractively valued and have sustainable growth prospects. During the fourth quarter, we took advantage of share price weakness to build a position in Epiroc, a specialist provider of equipment and services in the mining sector. Together with Sandvik, Epiroc has a strong position in this niche and growing market. Appointment of new fund manager and outlook Alex Araujo was appointed manager of the M&G Global Themes on 1 January 19. His investment process combines top-down and bottom-up analysis. Top-down thematic research allows Alex to identify drivers of long-term growth arising from structural trends, while avoiding the pitfalls of fleeting fads and speculative manias. He has identified four structural themes: demographics, environment, infrastructure and innovation. Environmental, social and governance (ESG) analysis is integrated into the investment process. There is no change to the investment objective or policy of the fund, which aims to achieve a higher total return (the combination of capital growth and income) than that of the MSCI ACWI over any fiveyear period. The abrupt reversal in equity markets towards the end of 18 caught many investors by surprise and the pick-up in volatility has led to increasing discomfort among those who identify themselves as risk averse. Volatility is not synonymous with risk, however, and it is our strong belief that short-term swings in sentiment can present excellent opportunities for long-term investors. What has surprised us in recent months is not so much the return of volatility, but the fact that the market downturn has occurred at a time when little has changed on a fundamental basis. We see excellent opportunities across a variety of countries and sectors for companies with robust cashflows and solid growth prospects. Growth is available at attractive prices, and in many cases at bargain prices, which gives us great confidence for the fund s performance in the years ahead. We look forward to the future with optimism. AUST-Q-18

5 Long-term performance Sterling I 1 year 3 years pa 5 years pa Since launch M&G Global Themes Comparative IA Global sector average quartile ranking in sector 1 1 Source: Morningstar, Inc., UK database as at 31 December 18. Sterling I class shares, income reinvested, price-to-price basis. The fund s sterling I class shares launched on 3/8/1. Performance data shown prior to this date is that of the fund s sterling A share class. Euro A 1 year 3 years pa 5 years pa Since launch M&G Global Themes Comparative Morningstar Global Equity sector average quartile ranking in sector 1 Source: Morningstar, Inc., Pan-European database as at 31 December 18. Euro A class shares, net income reinvested, price-to-price basis. US dollar A 1 year 3 years pa 5 years pa Since launch M&G Global Themes Comparative Morningstar Global Equity sector average Source: Morningstar, Inc., Pan-European database as at 31 December 18. USD A class shares, net income reinvested, price-to-price basis. 1 On 17 November 17 the fund re-launched - the fund s name, objective, performance comparative index and sector changed. On 17 November 17, the fund s name, objective, policy, and performance comparative index changed. 3 Past performance shown to 1 November 17 is the FTSE Global Basics Composite (comprising all subsectors of the FTSE World except media, IT, telecommunications, financials and healthcare). Past performance shown from 17 November 17 is the MSCI ACWI. AUST-Q _3555 The Global Equity sector combines the following sectors: Morningstar Global Large-Cap Blend Equity sector; Morningstar Global Large-Cap Value Equity sector; Morningstar Global Large-Cap Growth Equity sector; Morningstar Global Small-Cap Equity sector; Morningstar Global Flex-Cap Equity sector; Morningstar Global Equity Income sector. Past performance is not a guide to future performance. For Investment Professionals and Institutional Investors only. Not for onward distribution. No other persons should rely on any information contained within. Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to Qualified Investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ( Qualified Investors ). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only. In Spain the M&G Investment s are registered for public distribution under Art. 15 of Act 35/3 on Collective Investment Schemes as follows: M&G Investment s (1) reg. no 39, M&G Investment s () reg. no 1, M&G Investment s (3) reg. no 391, M&G Investment s (5) reg. no 97, M&G Investment s (7) reg. no 51, M&G Investment s (9) reg. no 93, M&G Investment s (1) reg. no 115, M&G Investment s (1), reg. no 13, M&G Global Dividend reg. no 713, M&G Global Macro Bond reg. no 15, M&G Optimal Income reg. no 5, M&G (Lux) Investment s 1 reg. no The collective investment schemes referred to in this document (the Schemes ) are open-ended investment companies with variable capital, incorporated in England and Wales in respect of M&G Investment s and in Luxembourg in respect of M&G (Lux) Investment s. In the Netherlands, all funds referred to, are UCITS and registered with the Dutch regulator, the AFM. This information is not an offer or solicitation of an offer for the purchase of investment shares in one of the s referred to herein. Purchases of a should be based on the current Prospectus. The Instrument of Incorporation, Prospectus, Key Investor Information Document, annual or interim Investment Report and Financial Statements, are available free of charge, in paper form, from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, ECR HH, GB; or one of the following - M&G International Investments S.A., German branch, mainbuilding, Taunusanlage 19, 35 Frankfurt am Main; the Austrian paying agent: Société Générale Vienna Branch, Zweigniederlassung Wien Prinz Eugen-Strasse, 8-1/5/Top 11 A-1 Wien, Austria; the Luxembourg paying agent Société Générale Bank & Trust SA, Centre operational 8-3, place de la Gare L-11 Luxembourg; the Danish paying agent: Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj Allé 33, Postbox 85, DK-9, Copenhagen C, Denmark; Allfunds Bank, Calle Estafeta, No Complejo Plaza de la Fuente, La Moraleja, 819, Alcobendas, Madrid, Spain; M&G International Investments S.A. or its French branch; from the French centralising agent of the : RBC Investors Services Bank France; or from the Swedish paying agent: Nordea Bank AB (publ), Smålandsgatan 17, holm, Sweden. For Switzerland, please refer to M&G International Investments Switzerland AG, Talstrasse, 81 Zurich or Société Générale, Paris, Zurich Branch, Talacker 5, P.O. Box 57, 81 Zurich, which acts as the Swiss representative of the Schemes (the Swiss Representative ) and acts as their Swiss paying agent. For Italy, they can also be obtained on the website: it. For Ireland, they are available in English language and can also be obtained from the Irish facilities agent, Société Générale SA, Dublin Branch, 3rd Floor IFSC House The IFSC Dublin 1, Ireland. For Germany and Austria, copies of the Instrument of incorporation, annual or interim Investment Report, Financial Statements and Prospectus are available in English and the Prospectus and Key Investor Information Document/s are available in German. Before subscribing investors should read the Prospectus, which includes investment risks relating to these funds. The information contained herein is not a substitute for independent advice. This financial promotion is issued by M&G Securities Limited. Registered Office: Laurence Pountney Hill, London ECR HH, authorised and regulated by the Financial Conduct Authority in the UK. Registered in England No. 977The Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, the CMVM ) has received a passporting notification under Directive 9/5/EC of the European Parliament and of the Council and the Commission Regulation (EU) 58/1 enabling the fund to be distributed to the public in Portugal.