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Sarasin IE Global Equity Opportunities (USD) - News
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Fund Name Changed
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Tuesday, 22 November 2016
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Official Announcement
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The Sarasin IE EquiSar - Global Thematic (USD) will change it's name to Sarasin IE Global Equity Opportunities (USD), effective from 22 November 2016
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Sarasin Equisar $ Global Thematic comment - Dec 15
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Thursday, 10 March 2016
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Fund Manager Comment
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Oil and commodity markets, along with Chinese deflationary fears, continued to dominate global equity markets in the fourth quarter. Volatility in Chinese equities added to a another poor quarter for emerging markets, largely eclipsing the US Federal Reserve’s December rate rise - the first in almost 7 years.
The quarter saw particularly strong gains in our Disruption & Innovation holdings, including online retailer Amazon, developer and manufacturer Keyence, Google’s holding company Alphabet, and biotech firm Amgen. By November, price gains were so marked that we started to take profits in several of the US software names, bringing the theme weighting back below 25%.
It was a more challenging period for some of our Corporate Restructuring names, including Hartford Financial Services and several of our bank holdings including Barclays, Citi and ING. After recent falls we continue to expect our bank holdings to rally as their potential dividend growth is recognised and capital ratios continue to improve.
Despite holding only 4.5% in energy linked stocks, our BP restructuring position and our Strong get Stronger position in Anadarko (US oil and shale production), both performed poorly as oil hit new lows in December. Meanwhile, emerging market exposure, while still underweight, rose modestly by quarter end.
Further declines in oil and emerging markets will drive greater volatility in global equities in the short term, although we have likely seen the worst of the correction. Buying opportunities are already appearing in the strongest of our emerging world franchises, in our bank restructuring opportunities, and in areas where activity is unaffected by the recent turmoil and where secure supply is key (such as defence, data centres and dialysis).
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Sarasin Equisar $ Global Thematic comment - Sep 14
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Monday, 20 October 2014
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Fund Manager Comment
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The US remained an economic bright spot throughout much of the third quarter, though the Federal Reserve is still expected to start hiking interest rates only around mid-2015, and Chair Janet Yellen continues her labour market focus. In Europe, meanwhile, despite a disappointing take up of TLTROs (targeted longer-term refinancing operations), Mario Draghi claimed that the European Central Bank remained ready to deploy more unconventional monetary policy in the face of weak data and entrenched deflation. Elsewhere, politics held centre stage through the Scottish independence referendum's 'No' vote in the UK, and anti-China protests in Hong Kong.
Our Corporate Restructuring theme turned around this quarter and was comfortably our best performing theme. Some of this strength came from a recovery in oversold financials (Citigroup and Hartford), but Nokia also made an excellent contribution to the theme's performance. Strong get Stronger was also much improved, with JP Morgan and Automatic Data Processing the frontrunners.
Amgen (biopharmaceuticals) in Disruption & Innovation was our top contributor, as analysts begin to price in pipeline success. Kansas City Southern was next in line, increasing guidance. The company's rail volumes, operating leverage and exposure to Mexico remain highly attractive.
The fund's performance was heavily impacted by poor performance from one of our largest positions, BorgWarner (automotive components), which was down 15% over the quarter. We still see real thematic strength in the company though, with new products providing incremental growth ahead, and core volumes may be better than consensus. Ocado also disappointed, due to thinning margins in the fiercely competitive UK grocery market.
During the period, we sold our holding in Tokio Marine (due to the subdued expectations for demand) and low expectations on capital returns, and began a position in Fuji Media, an integrated Japanese television broadcaster. We also reduced our position in Canadian Pacific Railways following an excellent run; its thematic story (Corporate Restructuring) is playing out, and its current price is factoring high expectations.
Global economic activity remains modest and there are few inflationary pressures in major economies, though concerns over the impact of future US rate rises in global equity markets are growing. However, markets should become increasingly selective as the recovery broadens and liquidity driven asset flows subside, and we perceive this to be a fertile environment for our thematic approach.
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Sarasin Equisar $ Global Thematic comment - Jun 14
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Wednesday, 10 September 2014
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Fund Manager Comment
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As we entered the second quarter of 2014, new IMF forecasts indicated robust global growth while continuing to call for loose monetary policy. In the UK, both growth forecast and employment data improved, but Bank of England policymakers indicated concern for continued intensity in housing market momentum. Policymakers at the US Federal Reserve remained seemingly cautious on rate rises in the face of a strengthening labour market alongside weakness in the housing sector, and poor (albeit weather-influenced) Q1 growth. Meanwhile, the Japanese hunt for inflation remained elusive, and in India a resounding victory for the reformist BJP means a potentially huge mandate for change. As the quarter drew to a close, the European Central Bank made history with negative deposit rates and new liquidity operations.
Equity markets continued to be strong over the second quarter, though not without some discomfort. The fund's underperformance over the period largely relates to a testing April, which saw a short but sharp rotation into value stocks and other under owned areas of the market (utilities, energy, and - to some extent - emerging markets). Indeed, our five worst performing stocks in April - Ocado, Intuitive Surgical, ASML, Amgen and Google - all came from our more growth-oriented Disruption & Innovation (D&I) theme. Though much of this rotation has since reversed, the situation was difficult to redress. Meanwhile, however, our Security of Supply (SoS) theme was much more successful, outperforming over the quarter. Both Continental Resources and Halliburton were particularly firm on the higher risk premium awarded to crude oil, due to Middle East unrest. Strong get Stronger (SgS), to which we have limited exposure, was our weakest theme, closely followed by Corporate Restructuring (CR) - both due to financial stocks. It seems the better capitalised banks in particular, such as BNP Paribas and JP Morgan (SgS) and Citigroup and UBS (CR), have come under regulatory scrutiny.
Despite some geopolitical setbacks, we remain encouraged about the sustainability of the global recovery. US economic data has been firming and markets continue to hit new highs, while emerging markets and Europe are expanding, albeit very slowly in the latter case. Volatility has remained extremely low, signaling low levels of anticipated risk, but also perhaps some degree of complacency. So, while remaining comfortable with the backdrop, we are less confident about markets' ability to cope with liquidity removal and signals of rate normalisation. Thematically, we are confident in the style barbell of our overweights to both CR and D&I, though the lower weighted themes (SgS and SoS) also seem to stack up well in this environment.
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Sarasin Equisar $ Global Thematic comment - Mar 14
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Thursday, 5 June 2014
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Fund Manager Comment
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The first quarter of 2014 was a particularly interesting one. Market weakness early in the period gave way to strength in March, bringing markets back to a positive level for the quarter. We outperformed in the earlier stages of the New Year, before underperforming in March. Strength was mainly seen in developed world markets, with some weakness evident in the emerging world where investor malaise arose amid unrest in a broad swathe of developing countries and some Chinese debt defaults (although authorities are unlikely to let this become persistant). Meanwhile in Europe, investors have been undeterred by low level inflation, which may lead to further stimulus.
Our Disruption and Innovation theme was the best performing theme over the period. In particular, robotic surgical system maker intuitive Surgical has begun to recover from its weak performance last year, and A B Foods continues to benefit from Primark's expansion.
Quantitative easing tapering in the US and rising rates make for a much better environment for the Strong get Stronger theme. Nissan, Valero and radiology equipment maker Varian Medical Systems were better performers here. On the weaker side was Corporate Restructuring, still our biggest theme. We continue to see under-recognised potential in Vodafone, which has been a little weak since the sale of Verizon Wireless, and have been adding to the stock since this event, Also in this theme, Citigroup's failure to pass the CCAR stress test led to weakness late in the quarter. Elsewhere, we sold toy maker Mattel from Franchise Power after particularly poor Q4 earnings, and we took the opportunity to increase our position in railway operator Kansas City Southern (Security of Supply) following disappointing regulatory newsflow.
We are hopeful that the global economy will gain speed over coming months, while overall monetary conditions (albeit a little tighter in the US) remain positive. We do, however, expect somewhat higher levels of volatility, and continuing dispersion between the markets of different countries, sectors and themes. We also anticipate that the cyclical performance which has worked so well in our Security of Supply theme in recent months to remain well supported, and we are looking to raise exposure further here.
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Sarasin Equisar $ Global Thematic comment - Sep 13
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Tuesday, 31 December 2013
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Fund Manager Comment
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The third quarter of 2013 opened with a wave of forward guidance, as the Bank of England and European Central Bank announced that monetary policy would remain accommodative for an extended period. German Chancellor Merkel secured her third-time general election victory, but quarter-end news flow was largely US-dominated. Firstly, the Federal Reserve shocked markets by delaying its widely anticipated quantitative easing tapering, and secondly, markets were held in suspense as politicians wrangled (once again) over the nation's budget.
The period saw a general shift out of US markets and into Europe, as sentiment there picked up in tandem with long-awaited macroeconomic data improvements. This was especially notable in July, with a dash into value, and economically sensitive and industrial type securities (i.e. autos and financials). Unfortunately, our style bias towards growth and quality oriented companies in Europe was not enough to keep up; in a challenging quarter for relative performance, the fund lagged the benchmark.
We switched from Verizon into Vodafone; the latter rallied strongly on the news of Verizon's deal to buy out the wireless stake of its joint venture in the US. We also sold out of Tesla, taking profits after a strong rally. Miners rebounded impressively, and amid the potential for improved capital discipline and improvements in China we saw a good performance by Glencore Xstrata. Netflix - the online media streaming service - also did well.
We sold out of Microsoft and Occidental, where we had lost conviction in restructuring plans. After a long impressive performance on the back of US housing market recovery, we sold Home Depot in favour of European DIY chain Kingfisher, which should benefit from European improvements.
The investment environment remains challenging, and growth is still patchy. Companies have brought margins to near record levels, while profit growth has been muted and markets have risen to near record highs by multiple expansion. Our global thematic investment process looks to identify companies exposed to the pockets of growth with catalysts for earnings expansion, and as such we currently have most exposure to Corporate Restructuring. Our two newer themes, Disruption & Innovation and Franchise Power, help us to find long-term growth potential in which we can have real confidence, and we look to identify more companies in these categories over the coming quarters.
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Sarasin Equisar $ Global Thematic comment - Jun 13
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Friday, 13 September 2013
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Fund Manager Comment
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The strong rally of April and May gave way to poorer sentiment as the US Federal Reserve (Fed)'s commentary became more hawkish. There are some fundamental, albeit related, concerns about the trajectory of tapering and the China Interbank crunch. Cyclical equities have been hardest hit, notably resources and emerging markets (EM), where rising current account deficits, the general rising trend of the US dollar have increased concerns.
We have had a strong quarter in relative and absolute terms. Corporate Restructuring, our largest theme by exposure, has yet again proved best. Insurers Hartford Financial and Tokio Marine were amongst our strongest performers here. We are considering the potential for a higher interest rate environment, and financial leverage is currently amongst the lowest in the theme's history.
We are pleased with the performance of our Disruption & Innovation theme, which was introduced recently. Two holdings bought under the new definition have been the strongest performers in the portfolio: Tesla, the manufacturer of high performance Electric Vehicles, and internet subscription TV provider Netflix. Both of these companies would not have made it into the portfolio under the previous Intellectual Property & Excellence definition.
Franchise Power, which evolved from the long-standing Pricing Power theme, has also performed well. These companies tend to be strong incumbents, and typically do not suffer from the ebb and flow of demand which puts more marginal competitors at risk (think Coca-Cola).
Strong get Stronger and Security of Supply have been on the disappointing side, although the latter only marginally. This theme is exposed to some challenging areas, such as materials and EM, although much of this is Mexico (Cemex, Televisa, Kansas City Southern etc.), which was weak but at the better end of the EM spectrum.
Activity within the portfolio is higher than average, partly to reflect theme changes. New thematic stocks over the period include Tesla, Netflix, Intuitive Surgical and Mattel, whist stocks that we have exited include Pearson, eBay and Sun Hung Kai Properties.
Bernanke is playing a confidence trick, hoping that economic conviction is strong enough to reinforce growth whist the removal of stimulus is proposed as a positive. But it feels like a gamble. Although we continue to see demand for equities underpinned, given the patchy pattern of growth across the world, not all companies are well placed to deliver improving returns, and therefore stock selection remains critical.
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Sarasin Equisar $ Global Thematic comment - Mar 13
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Wednesday, 29 May 2013
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Fund Manager Comment
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It has been an extremely strong quarter, dominated again by the activity of central banks. Japan's monetary developments have been a fascinating spectacle, and many of our better performers over the quarter have been domiciled in the country.
Pricing power has been by far our best performing theme over the period where both Kubota and Mitsubishi Estate have benefited from this Japanese reflation. Kabel Deutschland was rumoured to have been approached by Vodafone and Cemex, the Mexican cement producer, is beginning to see strength in its core market as a result of political reform and US industrial reshoring. Cemex also have significant exposure to recovering US housing and infrastructure markets.
Our Intellectual Property & Excellence theme has also outperformed over the period. Verizon rallied in recognition of improving wireless margins driven by efficiencies and falling handset subsidies. Unicharm, the manufacturer of infant & adult nappies, has been a beneficiary of the weaker Yen.
Least helpful has been the performance of Security of Supply. Albeit markets have rallied over the quarter, much of the performance has been dominated by non-cyclical sectors. This was particularly exaggerated in Europe where metals recycler Umicore was one of our weaker stocks. It was also true in North America with materials companies such as Potash Corp and Cameco Lagging. A new purchase in this theme, US-Mexico railway operator Kansas City Southern, was the best performing stock in the portfolio over the period.
It would not be surprising to see some sort of pull back in the shorter term. Monetary policy of the world central banks remains critical to the on-going performance of equity markets. Growth does exist in places, but is not broad based, and there are increasing divergences between different region's policies and economic performances. Interestingly, this has been part of what catalysed the fall in inter and intra asset correlation, which has provided a much more fertile environment for our thematic approach. We have taken this opportunity to evolve a number of our core themes, the logic for which is set out elsewhere.
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Sarasin Equisar $ Global Thematic comment - Dec 12
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Thursday, 7 March 2013
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Fund Manager Comment
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Over the quarter, global economic momentum improved as leading indicators in China and Europe stabilised and the US housing market rebounded from a low base. The Chinese improvement was mostly driven by domestic demand, which benefitted emerging market exports to China. Despite the better macro backdrop, the ongoing political drama over the US fiscal cliff created an environment of excessive uncertainty and cast a pall over investor confidence. Businesses and households remained in a 'wait and see' mode, unwilling to commit to major spending decisions.
The result has been a very hesitant economic recovery. Markets, with the notable exception of the US, have had a positive quarter. EquiSar outperformed over the period; Pricing Power (PP) and Corporate Restructuring (CR) were the key sources of strength, whilst Strong get Stronger and, surprisingly, Security of Supply were marginal laggards.
In our CR theme, Citigroup, UBS and Hartford were significant gainers. PP was helped by two Japanese companies - Mitsubishi Estate and Makita - as the period saw significant yen weakness. On the negative side were three energy companies with stock specific issues: Saipem, BG Group, and Occidental Petroleum.
Transactions of note were the purchases of Reckitt Benkiser, Costco and Grupo Televisa (the Mexican media group) in our Intellectual Property & Excellence theme. We sold Rakuten, the Japanese ecommerce operator.
US fiscal dynamics are still a concern, but the recently negotiated deferral of any major decisions allows risk assets a further leg, possibly until February's discussions on the debt ceiling potentially leave investors questioning the sustainably of this situation. Recent moves higher in bond yields and equities would suggest that the rotation into 'risk' is beginning to gather steam. More recently we introduced a number of new positions to the portfolio: Kansas City Southern (a well-positioned US rail operator), mobile generator supplier Aggreko (following their profits warning in December), hotel chain Starwood (who are looking to move towards an operator-only model from an owner-operator model) and Varian (a leading supplier of radiotherapy equipment).
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Sarasin Equisar $ Global Thematic comment - Sep 12
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Friday, 16 November 2012
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Fund Manager Comment
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The third quarter belonged to the central bankers. Following the IMF's modest reduction in its global growth forecast, and continued signs of slowing in both emerging and developed economies, central banks responded with conviction. In an effort to combat the worsening global and domestic economic environments, there were rate cuts in many emerging market nations, and monetary intervention by the European Central Bank, the US Federal Reserve and the Bank of Japan. While proactive monetary policy is not without consequences, markets have responded favourably.
Markets have rallied strongly off their lows. This was largely driven by monetary policy actions, whilst the underlying macro environment and earnings have been steadily deteriorating. Our more cyclical themes, Pricing Power and Security of Supply, performed best, whilst the more risk-averse propositions such as Strong get Stronger and Intellectual Property & Excellence lagged. Our best performing Pricing Power stocks were Australian blood plasma specialist CSL, a new but small position in Santander's Mexican unit, and Corrections Corp, the leading private sector US prison operator. Google and media group Time Warner were the two best overall contributors to the portfolio, both of which we added to at the beginning of the period. We saw particular weakness in the two Corporate Restructuring tech positions Dell and Alcatel Lucent, and in JDS Uniphase which we held in Strong get Stronger but have now sold. Otherwise weakness in this theme was not driven by particular stock specifics but by market rotation out of branded franchise companies which had previously done well, such as Coca-Cola and Yum Brands. We increased our exposure to the theme, adding to Yum Brands and Barrick Gold on weakness and starting new positions in Ebay, Samsung Electronics and Sun Hung Kai Properties. We funded these purchases by selling Jeronimo Martins and Virgin Media, and reducing Wal-Mart, BorgWarner, Fresenius Medical and Dell.
The pickup in equity markets has surprised many, and may spur further liquidity flows into equities in Q4. Fundamentally, it remains to be seen whether or not recent policy loosening will feed through into the real economy. Our favoured thematic opportunities continue to be technology-led productivity, demographics, and 'stores of value'. Our strategy is to target companies which can tease out growth through innovation, increase prices through scarcity, out-invest their competitors and grasp the opportunity to restructure and improve shareholder returns. Despite a disappointing performance of late, we are confident that our thematic toolkit will enable us to continue delivering long-term outperformance.
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Sarasin Equisar $ Global Thematic comment - Jun 12
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Tuesday, 14 August 2012
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Fund Manager Comment
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June was characterised by a search for the fine balance between liquidity and growth. Spain became fourth in line to receive an EU bailout (but only for its banking sector), while Operation Twist was extended in the US and the Bank of England's Mervyn King announced plans to offer additional funding to banks to support lending. Global growth momentum appeared to have slowed, though the fall in gas and oil prices and the emergence of a new coalition government in Greece were both positive. A (modestly) successful EU summit concluded the month; despite the absence of a long-term plan for the region, a small step towards a banking union was taken.
Pricing Power and Security of Supply were the best performing themes over the period. These themes tend to be more cyclical and the market has begun to focus on the possibility of further liquidity provisions. Resource and asset price related stocks such as Saipem, Mitsubishi Estate, Potash and Boskalis were the main contributors here. Corrections Corp has also rallied strongly as there is a possibility of REIT conversion, which would provide significant further upside for the stock.
In the US, growth is slowing, earnings are moderating, the election and the looming fiscal cliff provide ample food for the bears. The provision of further stimulus to support the economy and asset prices is likely. The most recent European summit is the first to have delivered above expectations, though the problems in Europe remain considerable. We remain favourably disposed towards higher quality 'self-help' stories in Corporate Restructuring, the more assured growth characteristics of our Intellectual Property & Excellence theme and the autonomous funding characteristics of our Strong get Stronger theme. In terms of Opportunity Sets, we continue to focus our search for new ideas towards the specific groupings loosely defined by the reliable concepts of productivity and demographic change.
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Sarasin Equisar $ Global Thematic comment - Mar 12
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Friday, 1 June 2012
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Fund Manager Comment
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With economic leading indicators losing some of their positive momentum, there were signs that market confidence was beginning to fade towards the end of the quarter. Whilst market returns were more modest, March was a better month for the strategy in relative terms with the portfolio outperforming modestly. Our Corporate Restructuring theme benefitted from continuing outperformance in particular from US financials Citigroup and PNC Financial. The theme now represents approximately 25% of the portfolio as we expect resilient performance from such 'self-help' propositions. Intellectual Property & Excellence also performed well with Essilor, a strongly thematic company that is increasingly dominating the global spectacle lens market, performing well on good numbers. Security of Supply and Strong get Stronger were laggards; the former in part due to a weak performance from Gazprom, the latter due to poor performances from Barrick Gold and Occidental Petroleum. Energy was the weakest sector globally over the month.
We have undertaken a number of transactions over the month with sales of several smaller positions (including SQM and General Cable) and we switched Procter & Gamble into Coca Cola. From a Strong get Stronger thematic perspective Coke is a hugely cash generative company focused on shareholder returns, with uniquely identifiable categories and branding and powerful emerging market growth potential. We have also added opportunistically to several existing positions (including Novozymes and Dell).
We expect our continued focus on particularly resilient trends (such as 'getting more from less', and 'demographic consequences') to be rewarded as the market refocuses back onto fundamentals rather than QE speculation. Thematically we have particularly targeted stocks set to benefit from Corporate Restructuring, sustainable growth through Intellectual Property & Excellence and capital strength through Strong get Stronger and we have high conviction in these positions.
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Sarasin Equisar $ Global Thematic comment - Dec 11
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Thursday, 15 March 2012
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Fund Manager Comment
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EquiSar ended the year with a frustratingly poor month in performance terms. Markets were modestly up, with the US faring better than Europe and relative strength dominated by investors seeking safety in the more defensive areas of the market, whilst materials, technology and financials remained weaker. This played favourably into some of our Corporate Restructuring positions, where Pfizer was the strongest stock in the portfolio. Pricing Power was the weakest theme over the month, led in part by falls of Mitsubishi Estate and Kubota. Other areas of stock specific weakness were Oracle and Informatica, both held in our Intellectual Property & Excellence theme under the Data Obesity opportunity set. Barrick Gold in Strong get Stronger also lagged as the gold price succumbed to technically driven weakness. More positive were ASML and Intuitive Surgical, whose innovative growth strategies are yielding gains in our Intellectual Property & Excellence theme.
Stock selection remains concentrated around those trends we consider to be robust despite current economic uncertainty, such as demographics (including ageing, dietary change and emerging market consumption growth) and 'getting more from less' (such as more wisdom from data and 'trading down'). Current examples in the portfolio are Unicharm (a leading Asian toiletry producer), Essilor (the world's leading producer of spectacle lenses) and IBM (enabling the 'smart planet').
The equities of high quality global companies with long-term thematic drivers remain a compelling investment given their ability to grow their cash flow in real terms and provide attractive total returns (with yields equivalent to many bonds), their diversity of currency exposure, liquidity and - in many cases - financial independence from the banking system. As we focus on themes and more reliable trends across the global markets, we find many opportunities for well managed companies to prosper and we believe the portfolio has the right balance of stocks with strong or improving fundamentals, the value of which will be recognised in due course.
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Sarasin Equisar $ Global Thematic comment - Sep 11
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Thursday, 22 December 2011
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Fund Manager Comment
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August began with global market mayhem as US fiscal and political woes and euro zone turmoil deepened. Obama came under fire over his handling of the US debt ceiling affair, while across the Atlantic the ECB bought €36bn of Spanish and Italian government bonds, attempting to calm European chaos. Japan and Switzerland enacted currency interventions, and it became clear that global growth is slowing.
The Fund marginally underperformed its benchmark over the month. Thematically we are encouraged that the resilient aspects of our Strong get Stronger theme are now showing through in performance. Intellectual Property has been strong, though relative strength has succumbed somewhat to market weakness. We expect this to be temporary. Riskier assets in Corporate Restructuring and Pricing Power continue to be de-rated and our reduced exposure to these themes is looking sensible.
At the stock level, banks, industrials and technology have been areas of weakness, whilst low beta stocks (particularly consumer stocks) across many of our themes have been positive contributors, amongst them Jeronimo Martins, Wal-Mart, Proctor & Gamble & HJ Heinz.
Over the month we continued to add to growth and defensives, funding that through reduced leverage and cyclicality. We established new positions in Rakuten (Japanese internet retailer), International Flavours & Fragrances, and Yum! Brands.
We have high conviction in the thematic stocks that we own. Market levels and individual share prices are however being buffeted by macro events, and the timetable for policy makers to negotiate Europe's financial roadmap looks set to bring little relief over the coming months. The German President recently accused the ECB of violating its treaty mandate following its purchases of PIIGS bonds, so a resolution looks further and further away. We look to selectively reduce weightings of Pricing Power into strength if opportunities arise, and to increase exposure to Strong get Stronger.
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Fund Name Changed
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Thursday, 17 November 2011
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Official Announcement
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The Sarasin IE EquiSar - Global Thematic Fund (USD) will change it's name to Sarasin IE EquiSar - Global Thematic (USD), effective from 17 November 2011
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Fund Name Changed
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Monday, 10 October 2011
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Official Announcement
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The Sarasin CI EquiSar Dollar Global Thematic Fund will change it's name to Sarasin IE EquiSar - Global Thematic Fund (USD), effective from 1 July 2011.
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Sarasin Equisar $ Global Thematic comment - Jun 11
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Wednesday, 21 September 2011
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Fund Manager Comment
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Escalating Greek tensions and increasing fears of a global slowdown hit the markets during the first half of June. However, signs of smoother Japanese supply chains, a further drop in oil prices after the IEA decided to release some oil reserves, more positive US manufacturing data and a short-term resolution of the Greek debt crisis provided some relief. Meanwhile, the US Federal Reserve ended its QE programme, while the ECB signalled its intention to hike rates for a second time this year in July. Conversely, the Bank of England moved away from an interest rate hike.
Performance was slightly behind the benchmark. Despite the economic backdrop, earnings expectations have held up well. Given divergence between earnings expectations and forward indicators such as the ISM, we have shifted the fund towards stocks with a higher degree of sustainability in their margins. A number of changes were made over the month, including the purchases of Danone, HJ Heinz, Wal-Mart and Time Warner, which were funded by sales of Holcim, China Life, Invensys and a general reduction of our cyclical industrial tilt. Within our Opportunity Sets there are a number of thematic stocks which can thrive in a slower growth environment. In many cases these are likely to have lower risk, higher quality earnings streams, and show value after sustained periods of de-rating.
In the absence of further stimulus, the environment does not favour our Pricing Power theme, and we have further reduced exposure to this cyclical characteristic over the month and quarter. Three of our themes are particularly well suited to identifying winners in this more moderate environment. Corporate Restructuring - with the ability to protect margins, but now with an added emphasis on balance sheet quality - should do well. Serial innovators identified in our Intellectual Property & Excellence theme are expected to provide sustainable growth, albeit at a valuation premium. Thirdly, companies with autonomous financing ability - Strong get Stronger - should finally be able to out perform credit-constrained peers. Indeed, each of these thematic trends was increasingly evident over the month/quarter, excepting some underperformance from the more cyclical elements in Strong get Stronger.
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Sarasin Equisar $ Global Thematic comment - Mar 11
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Wednesday, 25 May 2011
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Fund Manager Comment
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Despite an array of negative newsflow, markets have shown significant resilience after an initial sell off. With regard to ongoing discontent in North Africa/Middle East, the oil price has been a key driver of both positive and negative relative returns, but the portfolio as a whole is now somewhat agnostic to moves in the oil price. The catastrophic chain of events in Japan has had obvious effects on our Japanese equities (such as Tokio Marine and Mitsubishi Estate) and some ongoing effects to broader supply chains (particularly in the automotive and technology arenas) are inevitable. However, our overweight stance to the region has been benign in relative terms, due to stock selection and a slant towards overseas sales and producers. Thematically, the environment has suited the higher-quality growth stocks in our Intellectual Property & Excellence theme (such as Novozymes). Clearly, the geopolitical events have catalysed some of the optionality in our Security of Supply theme, and we have seen strong moves in Peabody, Statoil and SQM. Corporate Restructuring was the weakest theme, largely down to its Japanese exposure. The improvement in economic data, most notably recent US employment statistics, is a double-edged sword for markets. Although we do not expect aggressive policy reversal, it is difficult to analyse the extent to which QE has been supportive. An end to this particular stimulus looks inevitable. Japan's policy makers may go some way to replacing this shortfall, although we must be sure that accommodative policy and the BoJ's dovish stance is here to stay. Aside from shorter-term disruptions, we are keen on Japan as a cheap market with excellent earnings growth and further leverage to ongoing recovery. We have spent some time considering whether corporate profit margins are as high as they can go, with the conclusion that there is some small room for further expansion in the US, but possibly little room for expansion in Europe, particularly whilst interest rates are starting to go up. However, concern about margins may become opportunity, if geopolitical tensions start to fall and commodity prices moderate. In the short term risk appetite remains high, although there is still scope for earnings-driven appreciation of global markets after this period of consolidation.
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Sarasin Equisar $ Global Thematic comment - Dec 10
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Thursday, 24 February 2011
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Fund Manager Comment
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Equities continued to perform in December. Corporate Restructuring was the best performing theme over the period, driven by risk assets; Fiat, for instance, was strong as the company came closer to the split and separate listing of its auto and industrial components. Hartford Financial Services has also performed well, having surprised the market with earnings and boosted their 2010 earnings forecast. This stock has a high beta to the market as asset price rallies boost the value of their holdings and reduce liabilities to customers on equity-linked retirement products, but longer-term the business should be positively re-rated as they reorganise themselves around customers rather than products. Pricing Power and Intellectual Property & Excellence (IP&E) have also outperformed the market over the month, but not by such a large margin. Of particular note has been some of the more cyclical exposure in these themes, such as Foster Wheeler, Arcelormital, Borgwarner and ASML. Despite an exceptional performance from Schroders, Strong get Stronger has again been one of the weaker themes, with these companies viewed as under-geared and lacking growth by the market in the current environment. Strong get Stronger and Security of Supply remain the lowest weighted themes, the latter because it presently remains quite highly correlated with Pricing Power. There is currently a high degree of optimism, and a number of sentiment indicators point towards a consolidation in the near term. However, due to existing levels of monetary and fiscal stimulus we are positively disposed to equity markets, with a couple of reservations - namely, ongoing debt concerns and emerging market tightening. We expect the global economy to undergo a moderate but firm recovery. In particular, we expect US growth to surprise on upside. The environment should continue to support the more cyclical sectors, so we still favour selected industrials. Valuations could be described as fair, and we see room for earnings growth (perhaps 13% for S&P). The margin progression on the back of cost-cutting in the recession is likely to be sustained, although we remain alert to factors like higher energy and commodity prices, and bullish guidance may be more difficult to attain later in the year.
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Sarasin Equisar $ Global Thematic comment - Jun 10
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Thursday, 19 August 2010
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Fund Manager Comment
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Economic data and confidence have continued to deteriorate over the month. Indeed, the slowdown seems to be now evident outside of Europe, in both the US and China. Risk aversion has been broad based and markets are testing technical support, the breaking of which may bode poorly for equity returns in the near term. The portfolio has fallen in line with the market. Corporate Restructuring - where we have had only limited exposure - has been the poorest theme in relative terms over the period. This is not wholly unsurprising given the challenging environment, and somewhat higher risk nature of the companies it tends to include: Home Depot, Monster Worldwide and Weyerhaeuser have been amongst the weakest stocks in the portfolio. Pricing Power - which tends to be somewhat more cyclical in nature - has also had a tough month, and has cost the portfolio more because we have been overweight. Much of our Industrials exposure is held here and we have sustained double digit percentage losses in a number of these companies over the period, namely: General Cable, Delta, Foster Wheeler, Safeway and Arcelormittal - all of whom we feel will more than recoup their losses over coming quarters. The three remaining themes (Intellectual Property & Excellence, Security of Supply and Strong get Stronger) outperformed the market, but not by much. Of particular note has been Fanuc, a Japanese Robotics manufacturer in IP&E, which is benefiting from demand as wage increases are demanded by workers in China. European exporters with significant USD earnings exposure, such as BMW & EADS, have also been strong.
Outlook
Undoubtedly economic conditions have been deteriorating as the broad based global stimulus is removed. We are holding onto the view that we are currently near the most southerly border of a range bound market. Our analysts' earnings estimates as yet remain intact, although weakening (which is not uncommon midrecovery). The ultimate outcome of this is reflation, or possibly inflation, where only real assets anchored to long-term inexorable trends will retain their value.
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Sarasin Equisar $ Global Thematic comment - Mar 10
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Thursday, 27 May 2010
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Fund Manager Comment
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In both relative and absolute terms it has been a good month for investors. Corporate Restructuring was by far the strongest theme over the period, up more than twice as much as the market. Lloyds, Citigroup and Fiat were up more than 20% as investors became increasingly confident about the economic recovery. This positive sentiment also favoured the more cyclical characteristics in our Pricing Power theme, with Steel, Energy and other Materials related names amongst the best performers. We have also been pleased here by the performance of airline stocks, where we see significant pricing improvements on limited capacity additions. Naturally in this environment the more defensive, high quality characteristics of Strong get Stronger resulted in those companies lagging relatively. as did the higher multiple growth companies in Intellectual Property & Excellence, although it has been gratifying at last to see some performance from Nintendo in this theme.
Our thesis remains bullish, economies in recovery and the market reasonably priced - 2010 consensus is currently for $79 of earnings on S&P 500. reflecting a multiple of 15x and inflation so far seems in check. We do have two specific nuances to this view: genuine growth stocks such as those in our Strong get Stronger and Intellectual Property & Excellence themes, although somewhat more expensive can sustain yet higher premiums. Cyclical and risk related companies, more akin to those in our Corporate Restructuring and to some extent our Pricing Power and Security of Supply themes. are compelling long term but susceptible to sentiment swings hinged around the economic growth and perceived interest rate trajectories. In reality, longer term we remain less concerned about the latter issue and see interest rates remaining structurally lower for a prolonged period. but volatility in sentiment continues to provide opportunities for stocks to trade dramatically around fair value against this broadly positive market backdrop and we have been flagging the possibility of a somewhat higher turnover in the fund since the beginning of the year.
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Sarasin Equisar $ Global Thematic comment - Dec 09
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Tuesday, 23 March 2010
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Fund Manager Comment
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Review
Equity Markets advanced again in December. We performed in-line with the benchmark over this period. There has been a mild headwind from the strengthening USD which affected some of the reflation orientated trades and the market became more focussed on higher quality growth stocks over the period. Some of the Industrials stocks in our Intellectual Property & Excellence theme showed their first significant outperformance for some time, closely followed by Pricing Power, this has been our most overweight theme at 29%. The Strong get Stronger and Corporate Restructuring were positive. but mild underperformers over the period largely due to their financials exposure.
Banks in particular were again disappointing, with Citigroup, Mitsubishi UFJ and Lloyds TSB the 3 worst performing stocks in the portfolio over the month. On a more positive note we have had particular success with Delta Airlines, which was up nearly 40% over the month following earnings upgrades. We believe that low levels of capacity and correspondingly high load factors as demand picks up are finally lending the sector Pricing Power not seen for many years. Both ArcelorMittal and US Steel have been strong performers in this theme. Input price increases and talk of price rises in China leading to lower exports have contributed to the more positive backdrop. Nissan, in our Corporate Restructuring theme, has been another strong performer. Cost cutting continues to beat expectation, inventory management has been strong and sales expansion in both China and the US has been extraordinary.
Outlook
Obviously, quite a bit depends on how fast GDP can grow over 2010, and the degree to which financials earnings in particular can recover over the period. In the short term inflationary expectations remain contained and there is a good chance that moderating job losses in the US can lift confidence in the recovery. With current consensus earnings for the S&P of 77.26 for FY 2010 and allowing for a 17x multiple, gains of up to 10% can be justified if economic momentum is sustained.
There will undoubtedly be rate tightening scares over the year, and gains may well be more stock specific than in 2009. We still think rates are likely to go up more slowly than consensus believes - US total debt to GDP is still at an eye watering 370%, and with interest rates close to zero it would be unfortunate to move too early.
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Sarasin Equisar $ Global Thematic comment - Sep 09
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Thursday, 17 December 2009
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Fund Manager Comment
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The broad changes we made to the portfolio during August, namely reducing our tilt towards the growth and quality factors particularly expressed in our Intellectual Property and Excellence theme in favour of the value, leverage and lower quality factors of our Corporate Restructuring theme by switching capital from one to the other, have stabilised the deterioration in performance. Geographically Japan has continued to disappoint, whilst some of our Emerging Market holdings, particularly the Brazilians, have been very strong. Itau Unibanco, held in our Corporate Restructuring theme, was up 22% over the month.
During September we have added AP Moller to the Strong get Stronger portfolio as we believe the company's superior financial strength versus major competitors and increasing discipline more than insulate investors against the supply/demand imbalance in container shipping. We have also added ArcelorMittal in Pricing Power because we believe Chinese measures to curb capacity in steel should benefit this industry consolidator. Furthermore, we have bought Monster Worldwide, a Restructuring company with significant leverage to an expected recovery in the labour market towards the end of the year. To fund these purchases we have taken profits in Yahoo and BG, a solid company which has limited catalysts to further relative outperformance. We have also sold Merck Kgaa and Bank of Yokohama from our Intellectual Property and Excellence theme.
There remains a concern that markets need to give back some of the gains made over the summer months and October is the traditional time to do this. Our view is that market participants are still underweight risk and cyclicality, with high levels of cash remaining in Money Market funds. Cash looking for higher returns has moved significantly into corporate bonds and performance has been strong. Much of this and more will shift into equity markets as evidence of economic recovery is confirmed. As yet aside from China, we have seen little effect from vast stimulus packages and much of this will not be visible until the end of this year. To date, about $107bn of US stimulus has been spent, or 19% of the total spending package. Although the ultimate trajectory of the recovery is unclear, we would give financial markets the benefit of the doubt over Q4.
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Sarasin Equisar $ Global Thematic comment - Jun 09
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Monday, 28 September 2009
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Fund Manager Comment
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Markets declined modestly in June and we have performed in line. Cyclicals have lost momentum while defensives have continued to drift upwards and we remain suspicious as to the durability of the rebound. The supply of new equity and the lack of convincing recovery in economic data have been a restraint.
Growth stocks are again in favour at the moment. Intellectual Property & Excellence has been a key performer with Icap particularly strong, but driven more by the defensive characteristics of companies like Unicharm and Inverness Medical Innovation. Pricing Power has also held up well as the market remains concerned about inflation. This is currently our most overweight theme.
After strong performances we have been reducing energy, industrials and emerging market positions, specifically Russia. We have added to attractively valued defensive positions, such as Nestle in IP&E and Lorillard in Pricing Power. These companies had lagged the market in recent months.
We are broadly positive on the equity markets. Volatility is trending down and the worst is undoubtedly behind us. However, the trajectory of the recovery remains unclear and the Authorities do not have much room for lowering the cost of capital through the interest rate mechanism. The risk premium has already contracted substantially and this is unlikely to drive markets in the absence of evidence of growth. The market has become impatient with the pace of recovery and seasonality does not bode well, so care is required.
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Sarasin Equisar $ Global Thematic comment - Mar 09
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Thursday, 11 June 2009
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Fund Manager Comment
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We have underperformed the brisk market rally in March, but are still ahead of the benchmark year to date. Macroeconomic data has stopped deteriorating at the rate we saw earlier in the year, and is now plain bad rather than catastrophic. Corporate Restructuring, Strong get Stronger and Intellectual Property & Excellence have been the better performing themes. We have had particular success with Deutsche Boerse, General Cable and Roche. Security of Supply was the weakest theme, rather through absence of robust performers than weakness of any particular stocks. Unfortunately, we locked in a number of losses close to the bottom of the market, including Fedex which we do consider high quality long term Pricing Power story, but we had become nervous at the extent of the deterioration in short term pricing environment. Although we sold before their weak numbers at the beginning of March, the stock has rallied aggressively since. This pattern of oversold stocks rallying hard is replicated broadly, the recovery has been driven by higher beta areas of the market, particularly in the Financials and Consumer Discretionary space where we remain underexposed in risk terms. We have gently been adding to more cyclical and risk based exposure where we see opportunities, rather than on a wholesale basis. In spite of the current optimism that has returned, it could be some time until we are more secure about the durability of the current rally. Valuations are reasonable, liquidity is high, and although the economy is still slowing we now see light at the end of the tunnel.
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Sarasin Equisar $ Global Thematic comment - Dec 08
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Thursday, 26 March 2009
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Fund Manager Comment
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Equity markets have rallied steadily over December albeit on reasonably light volume. The better performers over the period have tended to be energy and industrial companies in our Pricing Power theme (Petrobras, Kubota, Waste Management). We were also particularly pleased with our new Strong Get Stronger theme which was up 4% over the period. This was driven by a broad range of companies from financials (MUFG) to retailers (Tesco) and materials / energy (Occidental, Barrick Gold). Over the period we took profits in Santos and Edwards Lifesciences, and we sold our remaining position in Rio Tinto. We started a new position in Fedex which should gain early cycle Pricing Power as the supply chain management industry consolidates.
We remain focussed on the possibility that there is further deleveraging due, but on balance this should be offset by genuine buyers of equities as we approach a stabilisation of the macroeconomic environment. The good news on this front remains very limited at the moment, but policy (now on a global, coordinated basis) has become consequently more accommodative. Of particular note has been the massive expansion of the Fed's balance sheet to over $2 trillion. We will, however, be watching the coming Q4 earnings season with some trepidation and several blue chip companies such as General Electric in US have alluded to the difficulty of giving forward guidance on earnings when the economic horizons remain so unsettled. Currently though, volatility is falling, valuations are reasonable, and investors may well favour equities over government bonds which technically look very overboard.
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Sarasin Equisar $ Global Thematic comment - Sep 08
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Thursday, 27 November 2008
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Fund Manager Comment
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· Against a dismal market and deteriorating economic environment, we have had a particularly tough quarter in relative and absolute terms, losing nearly half of our YTD relative performance. We have been hurt by our Pricing Power and Security of Supply themes, where hedge fund deleveraging, risk aversion and economic concerns have driven down stock prices in our more cyclical companies. We are pleased, however, that in relative terms at least our Corporate Restructuring theme has provided better returns and a degree of diversification. In particular, and perhaps surprisingly given the environment, financials and consumer stocks were amongst the best performers here.
· We are fairly neutrally positioned today, with most risk being at the stock level rather than against currencies, geographies or sectors. This reflects poor visibility and focuses on our core stock picking strengths. Efforts to support asset prices by central banks may not suit the purist, but should prove successful in placating the financial system and restoring confidence. Markets have become oversold, and attractive in valuation terms even on extreme bearish earnings measures.
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Sarasin Equisar $ Global Thematic comment - Jun 08
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Friday, 29 August 2008
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Fund Manager Comment
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June proved to be a very poor month for equities. However, the fund continues to outperform on a relative basis, which provides some compensation. Markets are beginning to think that continued rising prices will now lead to rate hikes, whilst many key economic growth indicators are deteriorating. Confidence in the market is weak.
Our Security of Supply theme performed particularly well in an environment still conducive to the performance of mining stocks, although we continue to restrict our exposure to this area. Elsewhere we have been particularly encouraged by our healthcare exposure (now our largest overweight sectorally) which is largely held in our Pricing Power and Intellectual Property & Excellence themes. We have been rebuilding our weighting in Corporate Restructuring, although it has been somewhat disappointing over the month. This was in part led by a high Japanese exposure which gave up some of its relative outperformance. We are still hopeful that Japanese domestic investors will begin to switch money into equities as inflation picks up. The region is the strongest major market this year.
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Sarasin Equisar $ Global Thematic comment - Mar 08
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Thursday, 22 May 2008
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Fund Manager Comment
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Markets have had another difficult month, characterised by a continuation of the sell off followed by a recovery from mid-month. Equities, currencies and commodities, as well as sector and company leadership, have been difficult to read. We underperformed in March, though we remain ahead of the index for the quarter. Recently, we have taken advantage of the high volatility to rebalance the portfolio, reducing our overweight in Pricing Power and our exposure to Energy, Materials & Industrials. We have also narrowed the extreme underweight position in Financials and Healthcare and lowered the extent of our "growth" bias.
Despite well published difficulties, we continue to expect the Fed to handle the current issues without overcorrecting. It is worth pointing out that over the last month the most problematic sectors such as financials have performed the best. Indeed, US Homebuilders are the second best performing sub-sector this year. We believe that the current turmoil is throwing up some strong value propositions and on balance the market should start to recover as we move closer to the US election.
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Sarasin Equisar $ Global Thematic comment - Dec 07
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Thursday, 21 February 2008
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Fund Manager Comment
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December has been a solid month for EquiSar relative terms, although somewhat less inspiring in absolute terms, mainly due to the strength of the USD over the month. However, we are pleased to have provided a positive return, whist the fund's benchmark has been negative. The relative strength was broad based, with all of our themes apart from Corporate Restructuring having out performed. Restructuring continues to be affected by the turmoil in credit markets and the Japanese financials have again been notably weak. Global Convergence was the strongest of our themes, with Kinross Gold and Occidental particularly robust. The New Year often brings heightened levels of volatility, and this month is unlikely to prove exceptional. However, we remain well positioned to benefit from the more inevitable trends in the market place and are comfortable with the structure of the portfolio. It is probably too early to get excited about restructuring opportunities in the financial sectors but there may well be some later in the year. The competition for strategic assets continues to attract attention and we are looking to add further names to our Security of Supply theme. Stylistically we continue to focus on large cap growth stocks.
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Sarasin Equisar $ Global Thematic comment - Jun 07
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Wednesday, 26 September 2007
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Fund Manager Comment
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Markets have been subject to some profit taking in June, in part due to fears of a respite in the ongoing deequitisation process. We are nevertheless pleased to have out-performed.
Over the month Intellectual Property & Innovation has been the best performing theme, in particular driven by Novozymes and Monsanto. Our Pricing Power theme also did well over the period, with Petrobras particularly strong. Recently we have been buyers of CBS Corp, whose Pricing Power we believe will benefit from the US election and we have added to our Japanese financials in Corporate Restructuring. We funded these by taking profits in Santos and ABN Amro.
Outlook
The outlook for equities seems uncomplicated. Economics, earnings and valuations are fine. Newsflow, particularly M & A related, and liquidity may wane somewhat over the summer months, but the market should drift positively. We have plenty of new ideas and a process well pitched to take advantage of them.
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Sarasin Equisar $ Global Thematic comment - Dec 06
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Wednesday, 14 March 2007
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Fund Manager Comment
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We were pleased that our confidence in global equity markets was borne out in December, and some respite in last month’s extreme dollar weakness has provided reasonable absolute returns for investors.
The more cyclical and higher risk areas of the market provided the greatest returns, with stunning performances from Emerging Markets. It follows that our best performing themes were Global Convergence, Corporate Restructuring and Pricing Power respectively, with the more Growth orientated Intellectual Property & Innovation lagging marginally.
We are confident that equity markets will make further progress going into 2007. Growth and earnings are well underwritten and may again surprise on the upside and we may begin to see some multiple expansion in 2007. M & A activity continues apace. Despite our foray back into Emerging Markets over the last quarter, stylistically the portfolio should continue to make a steady transition towards more secular growth names away from the cyclicals.
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Sarasin Equisar $ Global Thematic comment - Sep 06
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Friday, 17 November 2006
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Fund Manager Comment
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Equity markets traded positively over the period, particularly into the end of the month. There has been a significant amount of sector and style rotation. One constant however has been the sell off in high beta oil and commodity stocks as global economic data has been somewhat restrained. In relative terms this has hit the more cyclical characteristics of our Pricing Power and Global Convergence themes. However, the market itself has been broadly supported by falling oil prices and falling bond yields, which has fostered an environment where investors have been reasonably comfortable embracing risk. Our Corporate Restructuring theme has performed well as a result.
We are confident that equity markets will make progress over Q4. Growth and earnings are well underwritten and may again surprise in light of lower oil prices, whilst inflation risks seem to be subsiding. Stylistically the portfolio will continue to make a steady transition towards more secular growth companies, reducing those with more cyclical earnings.
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Sarasin Equisar $ Global Thematic comment - Jun 06
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Monday, 28 August 2006
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Fund Manager Comment
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Global equity markets rebounded strongly from their mid- June lows, with the MSCI World index rising by more than 5.5% in sterling terms in the last 2 weeks, finishing the month just over 1% higher (Bloomberg). The high quality characteristics of our Efficiency and Automation theme performed particularly well as investors sought higher quality stocks during and after the equity market correction.
The more cyclical characteristics of Global Pricing Power, on the other hand, were sold aggressively at the beginning of the period but they rallied strongly towards the end of the month. It was, however, our poorest theme over the period. We are confident that the recent stability in equity markets will be sustained and see particular value in the high quality defensive growth stocks we are holding. The valuation of global equities is at a 15 year low in absolute terms and as equities continue to look compelling against other asset classes we retain our enthusiasm for the Fund.
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Sarasin Equisar $ Global Thematic comment - Mar 06
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Tuesday, 16 May 2006
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Fund Manager Comment
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Equity markets continued their strong performance in March, ending the quarter at their highest levels since 2000. We are pleased to have outperformed over the month and the quarter. In fact, EquiSar is now ahead of the benchmark over one, three and five years and, of course, since launch. We have been particularly pleased with our new theme, Global Convergence, which significantly outperformed the benchmark over the period. The beneficiaries of strong economic growth, asset reflation and growing M&A activity also contributed positively to our Corporate Restructuring and Pricing Power themes. We remain comfortable with the outlook for equity markets, but regard a modest de-risking of the portfolio prudent after recent strength. We will therefore be looking to reduce exposure to some of the most volatile areas and, where appropriate, to those stocks that have performed particularly well.
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Sarasin Equisar $ Global Thematic comment - Dec 05
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Tuesday, 14 March 2006
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Fund Manager Comment
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We have had an excellent December to crown a year of strong returns. The inflation backdrop has remained benevolent in the face of strong economic data and solid earnings momentum. Particularly, the Japanese market has gone from strength to strength on improving data, the Topix returning more than 8% in sterling terms over the month. We have had plenty of exposure to the region in our Corporate Restructuring theme and have used this rally as an opportunity to take profits from some overbought positions.
We remain confident about equity markets. The Federal Reserve has begun to intimate it may be near to ending the 18- month tightening policy. With corporate spreads at low levels there is a realistic prospect of a market re-rating in 2006 - something we have not seen for 5 years despite recent strength in the market.
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Sarasin Equisar $ Global Thematic comment - Nov 05
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Tuesday, 13 December 2005
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Fund Manager Comment
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Global Equities are proving resiliant and have continued to rally off October lows. Economic data has surprised on the upside whilst inflation seems to be contained and oil prices have been falling.
Thematically, Corporate Restructuring and Pricing Power have been excellent performers over the period, reflecting increasing investor appetite for both risk, particularly event driven, and cyclical exposure supported by a still benign monetary back-drop. Intellectual Property and Innovation was our best performing theme despite relative weakness in the Pharmaceutical sector. Japan and the US have been key outperformers. We have been overweight Japan and had been making efforts to reduce our underweight in the US.
We remain positive on Equity markets and we are commited to a continuation of this year end rally, but we remain vigilent to signs of slowing momentum and may look to take profits from some over extended positions.
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Sarasin Equisar $ Global Thematic comment - Sep 05
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Friday, 18 November 2005
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Fund Manager Comment
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Record high commodity prices, particularly in the wake of hurricane Katrina, were the main feature of September's strong equity rally. Despite our neutral weighting in this area, we returned an excellent absolute and relative performance for the month.
As inflationary pressures continued to build new areas with pricing power began to emerge. This provided support for our Pricing Power theme making it once again our best performing theme last month. Stable to slightly lower bond markets, on the other hand, negatively impacted the performance of the Cash flow Opportunities theme, given its positive correlation to the bond market.
We remain fundamentally positive for the equity market as we enter what is traditionally their strongest period of the year. However, a short-term setback is possible given their recent strength and one could reasonably expect to see leadership revert to some of the areas that have not performed so well recently.
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Sarasin Equisar $ Global Thematic comment - Aug 05
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Wednesday, 14 September 2005
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Fund Manager Comment
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August saw a period of consolidation following strength in July. Oil prices rose again and there were concerns that it would negatively impact profit margins and/or inflation. In the event, Q2 earnings were excellent while bond investors saw the rise in the oil price as deflationary rather than inflationary. Equities rallied nicely towards the end of the month.
Japan was the strongest region last month, which is a little surprising given its sensitivity to the oil price. Investors preferred to focus on the improving outlook for the domestic economy. Corporate Restructuring and Pricing Power were again the strongest themes, with gains in the former coming mainly from our exposure to the restructuring process underway in Germany as we approach the election. Pricing Power continued to benefit from further strength in energy and commodity-related investments.
Despite excellent returns this year, we continue to believe that the growth expectations embedded in equity valuations are modest. Sentiment indicators are broadly negative (which has historically proven to be a good buy signal) and investors, particularly in Europe remain lowly weighted in equities. We therefore look forward with optimism, especially as we approach the traditionally strong last few months of the year.
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Sarasin Equisar $ Global Thematic comment - Jul 05
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Wednesday, 14 September 2005
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Fund Manager Comment
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We are pleased to report an excellent month for our Thematic funds in both relative and absolute terms, as global economic growth strengthened and corporate earnings, cash flow and dividends exceeded expectations.
The growth characteristics of our Intellectual Property and Innovation theme stood out in an environment of increasingly positive economic data, while on-going corporate activity, particularly in Germany (where we have been heavily exposed) supported our Corporate Restructuring theme. The ultra-high quality nature of our Efficiency and Automation theme resulted in more modest, albeit positive, returns during the month.
While the possibility that we experience a period of consolidation in August cannot be excluded, we remain positive on equity markets on the back of attractive valuations, in absolute terms and relative to other financial asset, and robust earnings growth.
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Sarasin Equisar $ Global Thematic comment - Jun 05
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Monday, 15 August 2005
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Fund Manager Comment
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The strong performance in Equity markets has continued into June. The rally has been broad based, despite continued high oil prices and a further strengthening of the dollar, particularly against sterling (because of weakness in UK economic data and news that several members of the MPC had voted for rates cuts). Our Cash Flow Opportunities theme has thrived in this environment of falling bond yields. Our holdings in highly cash generative oil companies such as Occidental Petroleum, ENI and BP (with cash flow yields of 7.9%, 9.6% and 7.6% respectively) have been particularly successful. Elsewhere, the ongoing undershooting of inflationary numbers has fueled our Global Pricing Power theme.
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Sarasin Equisar $ Global Thematic comment - Apr 05
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Tuesday, 14 June 2005
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Fund Manager Comment
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April was a difficult month for markets. Cyclical stocks began to sell-off as economic statistics turned increasingly negative and risk aversion increased. This resulted in a shift into the more traditional defensive sectors such as tobacco and pharmaceuticals, so whilst Corporate Restructuring lagged, the higher quality blue chips in our Efficiency & Automation theme outperformed. We have been encouraged by the performance of the Healthcare sector over the period and this remains our key sector overweight with exposure through most of our themes. Looking forward, we remain favourably disposed towards equities, but we recognize the potential for higher quality names to outperform and many stand on a discount to the broader market. We are keen to add to our Cash Flow Opportunities theme, possibly raising money from Intellectual Property & Innovation.
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Sarasin Equisar $ Global Thematic comment - May 05
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Tuesday, 14 June 2005
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Fund Manager Comment
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May began badly for equity markets as economic momentum continued to slow. Political uncertainty in the shape of adverse China/Japan relations, the forthcoming vote on the EU Constitution and US efforts to persuade the Chinese to revalue their currency caused additional uncertainty. However, we were encouraged by the excellent Q1 earnings and by exaggerated claims about the demise of the hedge fund industry in the wake of the General Motors debt rating downgrade. In our view there was a clear disconnect between fundamentals and sentiment, which presented an opportunity to perform in relative as well as absolute terms.
As expected, equities rallied towards the end of the month. Our largest theme, Intellectual Property and Innovation performed particularly well, as its focus on the healthcare and technology sectors was rewarded. Not surprisingly, the more defensive Cash Flow Opportunities theme marginally underperforming the market but we had already reduced exposure so that it represented our smallest theme. Overall, equities remain our preferred asset class thanks to historically low valuations (15 year low on the price to earnings ratio) and excellent fundamentals.
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Sarasin Equisar $ Global Thematic comment - Mar 05
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Wednesday, 13 April 2005
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Fund Manager Comment
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March has seen equity markets retrace most of the year's gains, but our portfolio remains ahead of its benchmark year to date. Alan Greenspan signalled that inflation was becoming an increasing concern and that the interest rate rises would at least continue, and may in fact accelerate. The carry trade has been unwinding as a result, with falls in a number of riskier assets such as high yield debt and emerging market equity and debt. There has also been weakness in the Mining and Energy sectors, though we were encouraged by the performance of our Pricing Power theme, historically exposed to these sectors, which bucked the trend by providing strong absolute performance over the period. We have moderated our medium term view to a mild positive on equity markets until the less positive prevailing trends diminish.
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Sarasin Equisar $ Global Thematic comment - Nov 04
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Monday, 24 January 2005
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Fund Manager Comment
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A definitive incumbent victory in the US election, falling oil prices and broadly stable bond yields have driven a rally in equities. It has however been a time of turmoil in the currency markets. The USD has fallen some 4% over the period on a trade weighted basis, flattering the benchmark MSCI World (USD) index which is up 5.3%. Equisar has outperformed this index by some 50 bps over the period. Our Global Pricing Power theme, which has the highest weighting in the portfolio, was the best performer, driven by a range of stocks such as World Co Ltd, the Japanese clothing retailer, and British Sky Broadcasting in the UK. Exposure to Japanese exporters in our Intellectual Property & Innovation theme left it the weakest theme over the period.
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Sarasin Equisar $ Global Thematic comment - Dec 04
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Monday, 24 January 2005
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Fund Manager Comment
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After a stagnant summer for equity markets, EquiSar experienced marginal out performance over the fourth quarter during a rally catalysed by the US election and falling oil prices. The higher risk and more cyclical natures of Corporate Restructuring and Pricing Power respectively, lead these returns. We do foresee a more difficult period for earnings in coming months and view the continuing trend of increased payout ratios as a support for the market embodied by our Cash Flow Opportunities theme. We are also keen to highlight the growth characteristics of our Intellectual Property & Innovation theme, as we believe those companies with a proven ability to bring new products to bear will be clear winners in the current environment.
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Sarasin Equisar $ Global Thematic comment - Sep 04
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Tuesday, 9 November 2004
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Fund Manager Comment
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Despite the oil price, which has remained stubbornly high, and as I write is touching the USD50bn threshold, the negative sentiment we saw in August became too extreme and resulted in a relief rally, with high dividend and IT hardware stocks leading the gains. Fittingly our Cash Flow Opportunities theme was the best performer over the period, driven by our sizeable holdings of ENI Spa and Occidental Petroleum, which have cash flow yields of 8.2% and 11.4% respectively. Global Pricing Power performed extremely well and commodity based stocks such as Cameco, AP Moller-Maersk and Rio Tinto were the key contributors. We remain positive on global equity markets, which are underwritten by the extraordinary fall in long bond yields. Corporate cash flow margins are at record levels across all global markets and high quality companies are at a valuation discount to the market as a whole.
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Sarasin Equisar $ Global Thematic comment - Aug 04
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Thursday, 23 September 2004
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Fund Manager Comment
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Despite rising volatility the fund has performed in line with the funds Benchmark, The MSCI World Index (US dollar), over August. Surging oil prices early in the month saw increasing levels of risk aversion, as investors began to worry about the impact of higher energy costs on profit and growth prospects. The defensive characteristics of Sarasin's Cash Flow Opportunities theme provided positive returns as a result. However, the market rallied towards the end of the month, as investors began to look beyond the short-term impact of these higher oil costs. The Materials exposure in Sarasin's Pricing Power theme performed exceptionally well during this rally. The fund manager's remain positive on Equity markets which they see as being underwritten by low valuations and strong cashflow in what the fund manager's perceive as being an over pessimistic summer period.
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Sarasin Equisar $ Global Thematic comment - Jul 04
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Thursday, 23 September 2004
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Fund Manager Comment
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Equity markets declined modestly in July as investors digested quarterly results and although future guidance has been mixed, the announced results were generally good. This is against a backdrop of oil prices reversing the fall in June and rallying to new highs in July. The fund essentially matched the performance of the benchmark over the period. The quiet summer period is favouring Sarasin's Cash Flow Opportunities theme, which has an emphasis on total absolute return. Within Sarasin's Pricing Power theme, some of the more cyclical holdings have performed very well due to a combination of valuation, ongoing pricing power and the realisation that global growth, especially China, is still quite reasonable. The fund manager's continue to wind down the funds exposure to Survival of the Fittest and built up Sarasin's new theme, Intellectual Property & Innovation.
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Sarasin Equisar $ Global Thematic comment - Jun 04
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Tuesday, 14 September 2004
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Fund Manager Comment
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Equity markets rallied in June as the oil price fell and investors began to accept the coming rise in US interest rates. The fund has outperformed the benchmark over the period. Earnings visibility and risk aversion continued to be key drivers and Sarasin's Efficiency & Automaton theme was strong as a result. After a tough April & May the more cyclical names in Sarasin's Pricing Power theme have also done better, and Sarasin was particularly pleased that one of the key Pricing Power holdings, Noranda, has been subject to a takeover bid. The fund manager's have gradually been winding down the funds exposure to Survival of the Fittest and Sarasin is introducing a new theme, Intellectual Property & Innovation over coming weeks.
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Sarasin Equisar $ Global Thematic comment - May 04
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Monday, 14 June 2004
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Fund Manager Comment
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May has been a difficult month. The positive economic data at the beginning of the period raised concerns about interest rates. Cyclical sectors and markets, such as the Emerging world, sold off aggressively as a result. It follows that our Corporate Restructuring Theme and Profiting from Deflation Theme were the worst performers. The former was hit by rising risk aversion and the higher cost of borrowing in an environment of rising bond yields. The latter was subject to selling as the relative attractions of the hard asset reflation plays like the property companies and gold producers were eroded. The environment has now stabilised and we consider ourselves well positioned to outperform.
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Sarasin Equisar $ Global Thematic comment - Apr 04
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Friday, 21 May 2004
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Fund Manager Comment
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Two threats to the global growth outlook have dominated global markets in the last few weeks. The first is speculation that the Fed will begin to raise interest rates in the next few months. The second is the risk of a sharp slowdown in China's growth. It is our opinion that both the trajectory and ultimate peak of US rates, and the possibilities of a hard landing for the Chinese economy are overblown. However market sentiment is more difficult to forecast and despite limited falls in major indices we have experienced a sharp drop off in relative performance over the period. Rising risk aversion and heavy sector rotation have mainly affected the Asian overweight Corporate Restructuring theme and cyclical Pricing Power elements such as Materials. Unsurprisingly the high quality business models in Efficiency and Automation, and the high dividend, high free cash flow characteristics of our Profiting from deflation have been clear outperformers.
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Sarasin Equisar $ Global Thematic comment - Dec 03
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Friday, 5 March 2004
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Fund Manager Comment
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The fund had another positive month in December. The 6.1% return was driven particularly by the Pricing Power theme which returned a solid 9.5% over the period. The weakening dollar, which fell 3.7% on a trade weighted basis over the period, has stimulated huge interest in dollar priced commodities. Primary producers such as the metals & mining companies have suffered from underinvestment for some years and are now experiencing resurgence in pricing power, stocks like CVRD, Noranda, Cameco and BHP Billiton were exceptional performers as a result.
A degree of uncertainty crept in to year-end trading, lifting energy, healthcare and utility stocks. These Cash generative sectors, which had underperformed over the year, now provide attractive value and contributed to a strong performance from the Profiting from Deflation theme which was up 8.9% over the period.
Sarasin are positive for 2004, although they doubt this year's strong upturn can be repeated. Sarasin do expect monetary policy to remain loose even as growth picks up. It will however be a year to exercise a degree of caution and not get swept away by consensus thinking, conditions which will argue strongly for the thematic approach.
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Sarasin Equisar $ Global Thematic comment - Sep 03
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Friday, 14 November 2003
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Fund Manager Comment
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Equities were flat over September, stalling the 6 month rally. The period was characterised by US dollar weakness and concern about the durability of the economic recovery in light of weaker than expected economic data, particularly concerning the US labour market.
Sarasin's new Profiting from Deflation theme, which was flat over the period, displayed its defensive characteristics. Survival of the Fittest was also strong in relative terms as investors sought larger cap, more defensive names. Asian Emerging Markets retraced some of the gains made over the previous month and Sarasin's Corporate Restructuring theme, which is very exposed to this area, underperformed despite strong gains from Sarasin's US airline holdings.
Technology and other cyclical stocks were also disappointing and Pricing Power was Sarasin's weakest performing theme over the period as a result. The fund manager remains confident that equities can make ground over the rest of the year, supported by strong liquidity, and that the fund can continue to provide outperformance.
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Sarasin Equisar $ Global Thematic comment - Jul 03
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Monday, 25 August 2003
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Fund Manager Comment
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Equities enjoyed a fifth consecutive month of gains in July. Macroeconomic news flow has been mixed, but a strong second quarter results season has supported markets. The major feature of this period has been a protracted sell off in bond markets. This suggests a higher borrowing cost for corporates and increased credit concerns. Sarasin have been reducing the Corporate Restructuring theme as a result. Sarasin have also continued to reduce the funds exposure to highly valued technology stocks held in the Efficiency & Automation theme. The proceeds have mostly been applied to cash generative companies in the new theme "Profiting from Deflation".
Sarasin remain interested in companies operating in the environment of the super competitive exchange rates and cheap money available in Far Eastern Emerging Markets and this should continue to be a significant part of the portfolio. Sarasin are also focusing on Japan where gradually rising business and consumer confidence indicates that risk aversion is declining, which should encourage further flows from low-yielding assets into stocks.
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Sarasin Equisar $ Global Thematic comment - Jun 03
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Wednesday, 13 August 2003
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Fund Manager Comment
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June was another successful month. EquiSar was positive over the period and outperformed the benchmark index. Corporate Restructuring stood out as Sarasin's best performing theme, returning more than 6% over the period. This was driven by an exceptional performance in the US Airlines (Continental, Northwest) and some Japanese cyclicals (Nippon Yusen, Nomura). Japanese Financials (Mitsubishi Tokyo Financial and Sumitomo Trust & Banking) were also responsible for an impressive performance from the Survival of the Fittest Theme. It was particularly encouraging to see the breadth of theme performances. Even Sarasin's worst performing theme over the period, Efficiency and Automation, was up, though it was tempered by a position in IT company Medion which consolidated after a strong positive move in the previous month.
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Sarasin Equisar $ Global Thematic comment - May 03
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Wednesday, 25 June 2003
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Fund Manager Comment
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The euro's 5.5% appreciation against the dollar compounded concerns about the economic outlook for Europe, where the fund's portfolio remains overweight, though hopes for an ECB rate cut contributed to a rally in the region towards the end of the month. Despite significant volatility, European indices were largely unchanged over the period, whereas the FTSE100 and S&P500 were up 4.1% and 5.1% respectively. The funds overweight position in Corporate Restructuring was rewarded as the market focused on higher-risk, story-driven situations, such as US airlines, and Far Eastern regional restructurings as the perceived risk of SARS diminishes. Global Pricing Power also put in a particularly good month, led by Altria which rallied 26% on the back of positive news flow concerning reduced litigation risk.
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Sarasin Equisar $ Global Thematic comment - Mar 03
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Thursday, 22 May 2003
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Fund Manager Comment
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The coalition's attempt to achieve wide ranging support for the Iraq conflict surpressed markets for the first half of the month, but the long anticipated 'war rally' did materialise. Markets and EquiSar provided positive returns over the period. Sarasin's Survival of the Fittest theme, with its natural overweight in US equities was particularly strong as high quality names attracted investors. The fund manager's are also convinced that the Restructuring theme, with its focus on bottom line earnings will perform well in the current environment. The fund manager's continue to believe that the economic environment remains challenging but the fund manager's are encouraged by falling oil prices, and view this as a key indicator to equity market performance over the coming months.
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Sarasin Equisar $ Global Thematic comment - Dec 02
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Thursday, 20 February 2003
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Fund Manager Comment
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In a month where the markets distinctly lacked seasonal spirit, the fund outperformed the MSCI World index by almost 2%. The thin trading conditions and the geopolitical noise surrounding Iraq led to some exaggerated downward share price movements. Having fallen for three consecutive years, the odds of a fourth year of negative equity markets are low. However, Sarasin do not expect a return to bull market conditions and believe that good selection will be key to future performance. Sarasin feels their themes have helped them to identify many of the recent stock market winners like Deutsche Telekom, UBS and Imperial Tobacco. In terms of markets, Asia and Japan continue to be promising, while Europe offers huge restructuring potential. Sarasin's feels that the global approach and use of themes are helping them to identify many of these opportunities before it is too late.
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Sarasin Equisar $ Global Thematic comment - Nov 02
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Thursday, 19 December 2002
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Fund Manager Comment
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The last week in November saw the Dow Jones blue chip index up for its eighth straight winning week. This was driven by the 50bp reduction in US interest rates in October and the run of firm statistics, notably US GDP, which was up 3.2% in real terms over the year. Corporates have started to take advantage of improved sentiment by raising funds. While corporate spreads have narrowed, they remain relatively wide. This should continue to support Sarasin's Survival of the Fittest Theme (which was again Sarasin's strongest over the period), but Sarasin recognises that we are in an environment of weaker corporate pricing power. Restructuring should benefit from improving sentiment to Japan and better corporate sector cash-flows. In spite of the fact that analysts continue to cut their medium term earning forecasts for equities, Sarasin believe the outlook is positive.
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Sarasin Equisar $ Global Thematic comment - Oct 02
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Wednesday, 13 November 2002
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Fund Manager Comment
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The US market managed to look through the mixed economic data and consolidate its fourth consecutive week of gains. The US and high beta sectors led the rally, with the Nasdaq outperforming broader European Markets by some 10%, albeit from lower levels and on reasonably light volumes. EquiSar is particularly exposed to Large Cap Technology names through Sarasin's Survival of the Fittest theme, which rose by 9.9% over the period. Sarasin's Energy theme suffered from the erosion of the war premium - Brent traded down from $29 to $25 - and lower production guidance from BP. Japan received a setback as Koizumi's "jam tomorrow" attitude to the reflation plan depressed equities. The restructuring theme rose by just 3.8% over the period. Overall, further strength is anticipated and the fund managers remain cautiously optimistic.
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Sarasin Equisar $ Global Thematic comment - Sep 02
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Monday, 11 November 2002
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Fund Manager Comment
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It has been a turbulent month for equity markets, the MSCI World index (GBP) is down 12% over the period. The S&P 500 dropped 11% over the month, its worst performance since the LTCM-inspired panic of August 1998. The market believes the strength of the global economic recovery is not sustainable and that, at best, real growth will remain in the anemic groove seen over the past year; at worse, there's a double-dip. This scenario, one of extreme economic pessimism, is an overreaction. Pricing power is scarce in this environment, but where available is a strong defensive characteristic. Global Pricing Power was Sarasin's best performing theme over the month. Global equities appear fairly valued on a number of measures, but sentiment remains subdued and the market is testing some key technical levels. The fund managers remain focused on equities without significant economic exposure.
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