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Coronation Global Managed Fund - News
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Coronation Global Managed (USD) comment - Mar 18
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Tuesday, 12 June 2018
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Fund Manager Comment
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Our previous quarterly report highlighted the almost ominously low levels of volatility as evidenced in the length of the bull market (without a technical pull back), the fact that calendar 2017 showed no negative monthly returns (a market first), and the very low levels of implied volatility when buying options. The first quarter of 2018 however shattered this level of complacency. While the year started with a very strong January, a combination of the re-assessment of interest rate levels over the next few years, aggravated by some inflationary pressures, as well as a renewed focus on the privacy debate pertaining to the new technology giants (on the back of some data manipulation claims against Facebook) led the equity market into a new era of volatility. Both February and March produced negative returns, and moving into April the market flirted with the 10% retracement level that would constitute a technical correction. The more recent market jitters have been in response to the increasing probability of a US/China trade war.
The quarterly return for the MSCI All Country World Index (ACWI) was negative 1.0%. Surprisingly, emerging markets outperformed developed markets, producing a return of 1.4%. The rolling 12- month return for the ACWI remains impressive at 14.9%, surpassed by an emerging markets return of 24.9%. The ACWI's five-year annualised return is also reasonable (9.2% p.a.), this time exceeding that of emerging markets (5.0% p.a.). Sectors that outperformed over the last quarter include information technology (ironically, given the recent pressure on Facebook and some of the other industry giants) and consumer discretionary. Materials and energy predictably performed poorly given the change in interest rate outlook, but it also adversely affected consumer staples, which sold off with the increase in longer term bonds (having erroneously been considered as bond proxies during the search for yield a few years ago). The US marginally outperformed the developed markets grouping, but continued currency weakness resulted in US dollar returns being very similar across different markets.
Global bond yields weakened slightly over the quarter, but the weaker US dollar also affected bond market returns worldwide. The Bloomberg Barclays Global Aggregate Bond Index's quarterly return of 1.4% (reported in US dollars) was at least 100 basis points lower in local currency terms. Listed property produced a negative return of 4.3%, affected by both interest rate jitters and a general risk-off trade. The US led the decline in this asset class, and apart from Japan, returns from most other regions were also negative. Again, the weaker US dollar aided the translation to the reporting currency (in USD).
Most commodities sold off against a backdrop of increased concern over the health of the global economy. Gold was essentially flat over the quarter.
The fund had a disappointing start to the year, underperforming its quantitative benchmark by 4.0% for the quarter. Since inception, the strategy return is marginally lagging its benchmark.
Our decision to reduce equity exposure some time ago added to relative performance, but our stock selection underperformed the ACWI benchmark materially over the quarter as well as over the last 12 months. Our instrument selection in property was also poor, as was our overweight position in the asset class. Our credit positions in fixed income performed well, and our gold holding added marginally. Over the last 12 months our biggest detractors were our underweight position in equity, and our stock selection within the equity bucket.
Our biggest positive equity contributors included Amazon (continued rerating on the back of sound execution and speculation about entering other categories), Advance Auto Parts (turnaround strategy gaining early traction after oversold share price), Hammerson (an unexpected bid for the company being rebuffed by its Board), and Airbus (a recent portfolio introduction continuing to execute well). The largest equity detractor was the prior quarter's top performer - L Brands. This after a poor trading statement resulted in its share price retreating to previous lows. Other losers included Altice (cable operator with poor results in its home market, France), Tata Motors (victim of market volatility and poor short-term sales numbers), and Intu Properties (fears that proposed Hammerson deal would fall through). Some of our consumer staple holdings were also marked down in line with the comments above.
We have significantly increased our portfolio exposure to tobacco stocks over the last 12 months. Currently close to 10% of the fund is invested in stocks such British American Tobacco, Philip Morris International, Japan Tobacco and Imperial Brands. While each company potentially offers a slightly different angle in terms of future returns, the overarching investment thesis is that the development of next generation products (while disruptive to the incumbent players in what has been a very stable industry) could prove to present the market with a new growth vector. Heat-notburn and vapour products have found favour with both existing smokers, as well as ex-smokers, and allow the industry to benefit from premium pricing. The recently announced Food and Drug Administration's review of the industry in America has increased uncertainty in the shorter term, allowing us to pay what we would consider attractive prices for these stocks. In the longer run, we anticipate the larger players to consolidate the new technologies, leading to improving margins compared to the combustible market (assuming no adverse tax developments). Some of these companies are now trading at valuation multiples not far off those levels when they were facing potentially crippling financial legal claims, and we think these positions will serve the fund well over the medium to longer term.
While the fund's short-term performance has been a disappointment, we take encouragement from the fact that the portfolio is showing very attractive potential upside based on our assessment of fair value for our individual holdings in the equity and property buckets. We continue to manage overall portfolio risk, and again over the last quarter we paid around 25 basis points away in the form of portfolio insurance. The cost of protection has now risen materially, and we would in all likelihood not replace the current protection measure when they expire.
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Fund Name Changed
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Tuesday, 22 August 2017
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Official Announcement
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The Coronation Global Managed (USD) Fund will change it's name to Coronation Global Managed Fund, effective from 22 August 2017.
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Coronation Global Managed (USD) comment - Dec 13
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Thursday, 16 January 2014
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Fund Manager Comment
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The fund appreciated by 5.6% in USD during the quarter, taking its 2013 return to +21.0% in USD. Since inception just under 4 years ago, the fund has generated a return of +10.8% p.a. in USD and in doing so has outperformed its benchmark (60% MSCI World index/40% Global Bond index) by 1.6% p.a.
Our views remain broadly unchanged: we believe that global equities remain the most attractive asset class and the fund's equity exposure in the low 60% level reflects this view. The fund's equity exposure was, however, reduced over the past few months as we sold or reduced a number of positions as a result of sharp share price appreciation. Over the quarter, equity exposure moved down from 71% to 63%. We also believe that selected listed property companies are attractively valued and around 9% of the fund is invested in this asset class. Lastly, we continue to hold the view that government bonds worldwide are overvalued and as such have no exposure and only negligible exposure to corporate bonds.
Whilst global equity markets have appreciated considerably over the past few years, we are still able to find good selected value and the fund's largest holding, Porsche (4.6% of fund), is one such example. Even though Porsche has appreciated by around 30% since our initial purchase, we continue to believe that the share is materially undervalued.
Porsche today is not actually Porsche as one would conclude from the name: in fact, its only asset (besides a net cash position) is a 32% stake in Volkswagen (VW) due to the fact that in 2011 VW acquired the Porsche assets. Our investment case is therefore first and foremost about VW. In our view, Porsche is merely a cheaper way to buy VW. There are a number of key points we like about VW as a business:
There are a number of key points we like about VW as a business:
- Owner of some of the best car brands in the world, notably the VW brand itself, Audi and Porsche (these three brands contribute 70% of group profits).
- A focus on higher-end brands (Audi and Porsche), which are better businesses than mainstream car brands, in our view, and generate higher margins and return on capital.
- Leaders in engineering and customer satisfaction, the results of which are reflected in the fact that VW's global market share has increased from around 9.5% in 2007 to almost 13% today (see graph below). The fact is VW makes attractive, reliable cars that people want to own.
- Scale (enabling more to be spent on R&D and marketing) and platform sharing (resulting in efficiencies between the various brands).
- High emerging markets exposure (est. 45% of profits) where car penetration is still low.
There is no debating that the car industry is a poor industry (very cyclical, capital intensive, intensely competitive, etc.), but within this industry there are inevitably winners - in our view, VW is one of them. Despite its strong earnings track record and operating metrics (5-year ave. ROE of 12%), the share trades on just 8.5x 2014 earnings.
In our opinion, the entire industry is being painted with the same brush (partly because of the poor history of US car companies and more recently a number of European car companies), whereas in reality not all car companies are equal. Whilst VW is very cheap in our view, Porsche in turn trades at a large discount to the value of its stake in VW (in effect on around 6.5x 2014 earnings). This is partly due to concerns about litigation from hedge funds arising from the short squeeze in VW shares in 2008. Even providing for the total litigation claim amounts (which is very unlikely to be realised in our view), Porsche would still be marginally more attractive than VW. If anything less than the full claim is realised, Porsche is far more attractive from a valuation point of view than VW. As such, we have taken all of the fund's exposure through Porsche.
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Coronation Global Managed (USD) comment - Dec 12
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Tuesday, 26 March 2013
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Fund Manager Comment
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The fund had a good year, appreciating by 16.4% in USD and in doing so outperformed its benchmark by 5.8%. The fund's returns were driven by high allocations to equity and listed property as well as stock selection within these two asset classes, with the fund's equity holdings outperforming the MSCI World Index by 5% and its property stocks outperforming the global property index by 17%. The fund has historically had very little exposure to Japan. While the long-term fundamentals for this country are poor (ageing population, high debt levels and deflation), the single biggest reason for our low Japanese exposure has been the fact that management teams in Japan, in our opinion, are typically not interested in doing what is best for their shareholders. We believe the probability of ever seeing the cash that sits on the balance sheet of corporate Japan is very low, and the below average price/book valuations of most Japanese companies are largely justified by this fact, taken together with the reality that ROEs in Japan are at abysmally low levels and are amongst the lowest in the world. Two of our global analysts went on a research trip to Japan in September and met with 30 Japanese companies. The trip largely confirmed our previously held negative views on the country, but we ended up including four stocks that we found attractive to the fund, three of which (Sundrug, Sugi and Tsuruha) are in the drug store industry. These stores sell pharmaceutical drugs and a range of consumer products, not unlike a Clicks store in South Africa. The drug stores look very different from your average Japanese company in a number of respects: against the backdrop of deflation they have managed to produce double-digit topline growth over the past 5 years (12% average sales growth for the three companies as opposed to -1% for the average Japanese company) and they have expanded their margins and have grown earnings at a double-digit rate (15% p.a. on average for the three companies compared with -6% p.a. earnings growth from the average Japanese company). Over longer time periods, the picture is the same: Sundrug has the longest listed history of the three and over the past 15-year period it has grown earnings by a factor of 9.5x compared to the average Japanese company which has grown its earnings by a factor of 1.4x. In terms of returns, the three drug stores generate ROEs in the 13% - 15% range, well above the 8% generated by the average Japanese company. All three drug stores have very strong balance sheets, with net cash positions ranging from 10% of market cap to almost 30% of market cap. Lastly, the valuations are very attractive: low double digit P/Es on the next 1 year of earnings (or high single digit P/Es if one strips out the net cash, which isn't contributing to earnings). In addition, founder families still own around 40% of the equity in these three businesses, but have all made the transition to being professionally managed operations. We believe the prospects for the Japanese drug store industry are very favourable: Japan has amongst the fastest ageing populations in the world and the number of individuals over 65 years of age increases in absolute terms every year. This in turn will result in an increase in per person spend on pharmaceuticals. Another key driver is the fact that the market is still very fragmented, with many 'mom and pop' stores and the largest drug store operator only having a market share of 5%. With large cash positions and ongoing strong cash generation, the three drug stores in which the fund is invested are well positioned to take market share both organically and through consolidation. In summary, we believe the Japanese drug stores today represent a very attractive investment opportunity and 4% of the fund in total is now invested in Sundrug, Sugi and Tsuruha. Our views on the various asset classes are broadly unchanged. We believe global equities are by far the most attractive asset class and this is reflected in the equity exposure of around 70% (close to the 75% maximum equity exposure limit). We also continue to find good value in listed property stocks (trading below NAV with yields in the 5% - 7% range typically) and around 8% of the fund is invested in property. We believe global government bonds are significantly overvalued and continue to have no exposure.
Portfolio manager team
Gavin Joubert, Neville Chester, Karl Leinberger, Louis Stassen and Mark le Roux Client
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Coronation Global Managed (USD) comment - Sep 12
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Tuesday, 11 December 2012
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Fund Manager Comment
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Despite the ups and downs created by macroeconomic newsflow, the fund continues to have a good year, with a return of 12.8% year-todate (YTD) in USD, some 3.2% ahead of its benchmark. This has largely been driven by reasonably high equity exposure (70% of fund on average) and listed property (7.1% of fund on average) as well as good stock selection in both equities (2% alpha YTD) and property (8% alpha YTD). Since inception 2.5 years ago (March 2010), the fund has generated a return of 6.8% p.a. in USD, which is marginally behind its benchmark due to the strong performance of global bonds over the period. Our views on the main asset classes remain largely unchanged. We feel that selected global equities are very attractive (resulting in net equity exposure of around 70%) and are finding decent value in global listed property (approximately 7.5% of fund). We also believe that global government bonds are overvalued (0% position, with a small corporate bond position of 2% of fund). Despite the fact that the higher quality global businesses have enjoyed strong share price performance over the past few years, we continue to believe that a number of these assets remain attractively valued given favourable long-term fundamentals. The global spirits industry is but one example where we have positions in the two largest spirits companies in the world: Diageo and Pernod Ricard. Diageo are the owner of among others Johnny Walker, J&B, Smirnoff, Baileys, Hennessy, Moët & Chandon and Guinness, while Pernod Ricard own Chivas Regal, Jameson, Martell, Absolut, Kahlua, Havanna Club and several others. Looking at the largest spirits markets in the world, by US dollar sales. Interestingly, China and India are already two of the three largest spirits markets in the world. Individuals in emerging markets are consuming large amounts of spirits: 82% of the world's spirits (by volume) are consumed in emerging markets! What is relevant for the global spirits companies is that very little of this consumption is of international spirits brands (the brands that are sold by Diageo and Pernod Ricard). The graph below illustrates what percentage of overall market volumes are made up by international brands and it is clear that the potential for premiumisation is significant, with only 1% of volumes sold in China being that of international brands, compared to 40% or more in most developed markets. In our view, the move to international premium brands will provide several years of growth for the global spirits companies. Besides the opportunity for premiumisation, the global spirits companies have significant pricing power, particularly in Scotch and Cognac as a result of their long ageing periods (ranging from 3 to 15 years). For example, in any particular year there will be a limited supply of 7 year Scotch. If demand exceeds supply (as it often does), automatic pricing power sits with the spirits companies. Pricing (as opposed to volume growth) is the best form of top-line growth as there is no additional cost associated with pricing (as there is with volume), so operating margins expand. Globally, the spirits market is very fragmented: the top two spirits companies (Diageo and Pernod Ricard) have a combined market share of 7%, whereas the two largest global beer companies (AB InBev and SABMiller) have a combined market share of over 40%. We believe that consolidation will continue and the market share of the two leaders will increase over time. Diageo and Pernod Ricard now trade on around 16x the next 1 year of earnings, with dividend yields of 2% - 3%. We believe this is attractive given the very high quality of these assets that have several years of low double-digit earnings growth ahead.
Portfolio manager team
Neville Chester, Gavin Joubert, Karl Leinberger, Louis Stassen and Mark le Roux Client
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Coronation Global Managed (USD) comment - Jun 12
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Thursday, 26 July 2012
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Fund Manager Comment
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Global markets continued to be driven by European newsflow in the first six months of the year - up, down and then up again. Against this backdrop the fund appreciated by 7.50% in USD and in doing so was 3.41% ahead of its benchmark (60/40 MSCI World/Global Bond index). In the two years and three months since inception in February 2010 the fund has generated a return of 5.3% p.a. in USD, marginally behind its benchmark due to strong bond performance (in which we have had a 0% position). We continue to believe that selected global equities are by far the most attractive asset class, and as a result the fund's equity exposure remains relatively high (69.5%). We are also finding attractive listed property companies in Europe and Asia, which make up around 9% of the fund. At the same time we believe that government bonds are significantly overvalued and therefore have no exposure. We however have a 3% exposure to corporate bonds. We have regularly made the point that a disconnect often exists between the newspaper/CNBC headlines/permabear newsletters on macroeconomic news (predominantly the Eurozone at the moment) on the one hand and the operational performance and share price behaviour of individual companies on the other. Making decisions based on macroeconomic newsflow more often than not leads to negative outcomes, yet time and again this is what people do: buy when the newsflow is good and sell when the newsflow is bad. Probably the most frequent question we are being asked at the moment is 'why should I invest in global equities now, in light of all the negative things happening in Europe'. Using this 'newspaper headline' approach to investing, one would never have invested in Inditex (owner of clothing retailer Zara) given that 70% of the company's revenue is generated from Europe, of which 25% is generated from Spain alone! Yet Inditex's share price is up 30% this year, after recently producing results that showed revenue growth of 15% and profit growth of 35%. Again, there is often a disconnect between macroeconomic newsflow and the fundamentals and valuations of individual companies. In our view one is far better served by focusing on the latter. An additional point that we would make is that we hold no European banks, no commodity shares and very little cyclical assets. Most of the fund's holdings will continue to do quite well operationally whether global GDP is +1% or -1%. We continued to add to the fund's position in Tesco (a top five holding) over the past few months. A couple of points are apparent when looking at Tesco's earnings:
> Tesco has an exceptional track record of growing its earnings over long periods of time;
> it has grown its earnings well ahead of the market over time; and
> its earnings have been more stable than that of your average company (i.e. the market).
Tesco's history tends to indicate that this is an above average business. Yet the share now trades on 9.3x earnings and a 4.8% dividend yield, more indicative of a low quality (or broken) business. It was not always this way. Not too long ago Tesco used to be a market darling and traded on 20x earnings. The table below clearly shows how the market has gone from being in love with Tesco to hating it. Over the past five years Tesco's revenue, earnings and dividends are all up around 50%, yet its share price has lost 28% of its value. As a result of this (growing earnings and declining share price) Tesco has gone from being rated on almost 20x earnings in 2007 (with a 2.3% dividend yield) to being rated on 9x earnings today, with almost a 5% dividend yield. The market appears to be taking the view that Tesco's UK business (2/3rds of profits today) is broken. Our view is different: firstly, Tesco generates 1/3rd (and growing) of profits from its international business (which is mainly in emerging markets including Korea, Thailand, Poland and Turkey), where it has a no.1 or no.2 position in 10 of the 12 countries in which it operates. The international business has grown its earnings by 28% p.a over the past 10 years and continues to do well. Secondly, we believe that the UK business is not broken: instead of having long-term structural problems, its problems are short-term in nature that can be fixed (underinvestment in stores and people). The fact is that in the UK Tesco is almost twice the size of Asda (the 2nd biggest player), with Tesco having 31% market share compared with Asda's (owned by the mighty Walmart) 17%. Over the past five years Tesco has lost negligible market share (31.3% five years ago versus 31.0% today) and has continually proven to be at the forefront of innovation in the UK food retail market (Clubcard, convenience corner stores, banking, etc.). Due to reinvestment, profits are likely to be subdued for the next two years or so, a prospect that a short-term investor cannot tolerate. However, for a longer-term investor this provides a very good opportunity to buy a world-class retailer on a single digit rating.
Portfolio manager team
Neville Chester, Gavin Joubert, Karl Leinberger, Louis Stassen and Mark le Roux
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Coronation Global Managed (USD) comment - Dec 11
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Tuesday, 20 March 2012
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Fund Manager Comment
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The volatility in global markets continued as 2011 came to a close, with the MSCI World Index ended the year -5.0% in US dollars and the MSCI Emerging Markets Index performing substantially worse than this, being -18.2% in US dollars for the year. Once again, government bonds delivered the standout performance, with the Citigroup Global Government Bond Index appreciating by 5.7% during the year. Against this backdrop the fund was marginally negative for the year (-2%), and 1.7% behind its benchmark (60/40 global equity/bonds), all of this due to the fund having a 0% weighting in government bonds. The equity portion of the fund actually outperformed the MSCI World Index by 6.3% for the year.
Our view for the past two years has been that global equities are far more attractive than domestic equities, and we continue to hold this view. Global equities significantly outperformed South African equities in 2011 (by over 13% in US dollars or ZAR) and we expect this outperformance to continue in the years ahead.
The table below shows the most recent sales growth and earnings growth for seven of the fund's holdings. The figures shown are for the quarter ended September 2011 and show year-on-year growth. While we are not interested in one quarter's earnings, the table below provides a counter-argument to the oft made statement that 'Europe and the world is a mess, why should I invest in equities now?' The fact is that many companies continue to do very well, even though the world is a mess. This is very clear from the table below: five of the seven companies grew their revenue by at least 25% year on year and six of the seven grew their earnings by 25% or more! Each company's individual fundamentals are different to that of the next company.
The point is that one cannot simply conclude that because the world is a mess one should not invest in equities. In fact, the opposite is typically the case: the best time to invest is when the outlook is gloomy. Basing investment decisions on TV or newspaper headlines is probably one of the worst investment 'strategies' around. Yet time and again one hears this 'messy world/don't want to invest' argument. In a year when the MSCI World Index declined by 5%, the share prices of six of the seven companies in the table below appreciated. The two standouts were Domino's Pizza, which appreciated by an incredible 112% in 2011 (we have since sold this position) and Mastercard, which appreciated by 67% in 2011 (we still have this position as we believe Mastercard remains undervalued even after this appreciation). These two examples yet again point to the fact that one can't come to a one-line conclusion on equities: one must evaluate each and every business on its own and make an investment decision on that particular equity.
Google and Apple are both Top 5 holdings in the fund today. While we own a number of technology stocks (including Microsoft, Cisco and Symantec), it is Apple and Google who are seen as being the more 'sexy' (and hence overvalued) stocks. Our view is different - firstly we believe that Google and Apple are higher quality businesses than your average technology company and have better long-term prospects due to the large potential markets that they serve, and secondly we believe that both are actually very attractively valued.
Google dominate the online search market and the resultant advertising spend that is increasingly shifting from paper to online. Many countries around the world are still in their infancy with regards to the shift in adspend from newspapers/magazines to the internet. In our view, this structural shift will continue for many years to come. In large part due to this shift, Google managed to grow their revenues year on year by 33%, and earnings by over 20% (see table) during the period when the European crisis accelerated (July-Sep 2011). Google is also now truly a global business, with over half their revenue coming from outside the company's home market, the US. The company also has an extremely strong balance sheet, with net cash of around $40 billion and free cash flow generation of around $10 billion a year, which results in an ever-increasing cash balance. Whilst there are of course risks to the business, at current share price levels Google trades on around 13x 2012 earnings excluding the net cash balance (which earns close to nothing due to low interest rates). At these levels, we believe the risk reward is in one's favour.
Apple has a number of key similarities with Google: a strong position in what is a massive and growing end-market (online advertising in the case of Google and smartphones/tablets in the case of Apple), a strong balance sheet ($80 billion in net cash already and free cash flow generation of well over $30 billion a year), a global presence (60% of revenues from outside the US) and an attractive valuation (less than 9x this year's earnings excluding the net cash position). Apple has become a very big and profitable business, and while it will undoubtedly become harder for the company to grow revenues and profits from current levels, the penetration rates of Apple's products is still very low with plenty of room to grow. For example, Apple currently only has 5% market share of the global cellphone market and within the cellphone market, smartphones are rapidly taking share from traditional handsets. Additionally, Apple only has 5% market share in the PC market (through the Apple Mac) and in turn the tablet market (iPad and similar) is still only a small percentage of the overall PC/laptop market. The death of the visionary Steve Jobs is undoubtedly a negative, however most of the key senior management team have been with the company since the late 90s and additionally the Apple platform and core products have already been established. Like Google, there are risks facing Apple, but at the current effective singledigit multiple, we believe that the risk-reward profile is very attractive. We continue to find very good value in global equities (Google and Apple being just two examples) and as a result the equity exposure of the fund (73%) is close to the maximum that we anticipate for the fund (75%). We are also finding selected good value in listed property, particularly in Asia, where the fund's holdings typically yield between 6% and 8% and trade below NAV. Approximately 7.5% of the fund is invested in property stocks. We remain negative on government bonds (due to low unsustainable yields/high valuations) and therefore have no exposure. The fund has some corporate bond exposure (3.5% of fund) where we feel the high single-digit yields compensate one for the risk of derating.
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Coronation Global Managed (USD) comment - Sep 11
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Thursday, 22 December 2011
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Fund Manager Comment
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The global market panic that started in August continued into September, driven primarily by the eurozone crisis and to a lesser extent by concerns over a possible hard landing in China. The market volatility continued to be extreme, with 5% daily moves being the norm. Fear has well and truly set in and most equity markets have now declined by more than 20% over the past few months. At the other end of the spectrum, US and German government bonds have appreciated by around 20% over this period. In the rush for the exits, most emerging market equities and currencies have seen significant declines, with the ZAR for example depreciating by 15% against the USD in a short two-week period. Even with all of the mess in the US and Europe, global equities have convincingly outperformed SA equities by 13% this year (+7.8% for the MSCI World Index compared with -5.4% for the FTSE/JSE All Share Index, both in ZAR). We continue to believe that global equities are far more attractive than SA equities. Against this backdrop the fund has had a somewhat disappointing year, with the gains (+11.2% in ZAR year to date) coming primarily from the weak local currency. The fund is now approximately 2% p.a. behind its benchmark (60% MSCI World Index/40% Global Bond Index) since inception, almost entirely due to the fact that the fund has 0% in government bonds, which for example have appreciated by a staggering 26% year to date in ZAR (7% in USD and 19% from the ZAR/USD currency move). US 10-year government bonds are now yielding 1.75%, as are German 10-year government bonds, driven down to these levels by good old fashioned fear and herd behaviour. We would argue that the balance sheets of these assets are very poor: US sovereign debt is already at very high levels and Germany's fiscal position is likely to deteriorate if the Germans want to keep the euro intact. To do so, would require funding contributions by Germany. Besides the poor fundamentals of these assets, the valuations do not make sense to us. With inflation at 2% plus, we cannot understand the attraction of a 1.75% yield and in our view this is a bubble as big as we have seen that will ultimately collapse just as all bubbles do. As a result, we continue to have a 0% position in government bonds, even though it is impacting short-term performance. In contrast to this, we continue to believe that global equities are extremely attractively valued (even more so today than a few months ago) and as a result the fund's equity exposure is at the high end of where we would expect it to be over time (currently 72% compared with an equity exposure maximum of 75%). The equity portion of the fund has performed reasonably well, outperforming the MSCI World Index by around 2% this year. We also continue to find good selected value in listed property (particularly in Asia) and just over 7% of the fund is invested in this area. Whilst we believe that government bonds are significantly overvalued, we are finding some good selected value in corporate bonds and 4% of the fund is invested in corporates. In terms of outlook, one must distinguish between the macroeconomic outlook and daily newsflow (which is poor) and valuations (which are very attractive). As previously mentioned, investors' biggest concerns today appear to be Europe and China and we will briefly discuss these two issues in more detail. Firstly, with regards to Europe, politicians' inept handling of the crisis has been a large contributor to the position that we find ourselves in today. Over recent weeks however a greater sense of urgency appears to have been awakened and there are solutions to the crisis (Eurobonds, recapitalisation of the banks, etc). These solutions will require additional financial support from Germany and without this the euro as we know it will be nonexistent. Either way (closer fiscal union or a break-up of the euro), it is our view that growth in Europe is likely to be anaemic for several years and the risks (of a recession or of a banking crisis for example) are still high. As a result, we own no European banks (and are very unlikely to do so). Most of the European shares we own are not European businesses, but global businesses that generate revenue from countries all around the world and furthermore are not significantly impacted by what is happening in Europe. A good example is Anheuser-Busch Inbev, the world's largest beer company and owner of Budweiser. The company is listed in Belgium, but today 40% of its profits come from emerging markets, most of which have growing economies and disposable incomes as well as low beer consumption. Whilst the other 60% of AB Inbev's profits come from developed markets (with the US being a large profit contributor), beer is less economically sensitive than most goods. In addition, the management team at AB Inbev run a very tight ship with a ruthless focus on costs, which will assist in protecting margins in the developed world in the event that economic conditions turn worse. AB Inbev currently trades on around 10x the free cash flow we believe it will generate over the next year, which we think is very attractive for an asset of this quality. With regards to China, in summary, our views on the country are mixed: whilst for example we believe that China cannot continue to spend the amount it currently does on infrastructure (which is negative for commodities), we believe that the economy will shift towards a more consumer-driven economy (as opposed to an infrastructure and export-driven economy). We don't believe that China will continue to grow at the 10% rate that it has achieved over the past 30 years, but we think a 5% - 6% growth rate over the next several years is achievable. Although low by historical standards, this would still make it one of the fastest growing economies in the world! The Chinese consumer will continue to emerge in our view, and this is where our research efforts in China are focused. For example, over the past few months, after the share price had halved, we initiated a position in Ports Design, a luxury ladies wear clothing retailer in China. We bought the position just before the company released its September same-store sales growth, which was an eye-popping +40% year on year. One does simply not find companies that are growing sales by 20% or 30% or 40% in the developed world. Moreover, at the time of purchase Ports Design was trading on less than 10x this year's earnings and the company has a net cash position. The share is +20% since we bought it, but still remains significantly undervalued in our view. There are undoubtedly risks in China, but there are also excellent investment opportunities to be found. In summary, whilst the world appears to be in a mess, fear and panic selling have driven many assets (global equities, property and corporate bonds) down to extremely attractive levels. In our view now is the time to be buying these assets and not selling them. One seldom makes money by investing when the outlook is rosy.
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Coronation Global Managed (USD) comment - Jun 11
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Tuesday, 6 September 2011
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Fund Manager Comment
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Despite ongoing volatility in global markets, the fund delivered a good performance in the first half of the year, appreciating by 5.91% year to date (in USD). This return is around 1% p.a. ahead of the fund's benchmark return (which is a 60/40 mix of the MSCI World and Citigroup Global Bond indices). Since the fund launched in February 2010 it has generated an annualised return of 10.1% in USD. While we are pleased with the absolute level of these returns, the fund is behind its benchmark since launch, largely due to having a large number of more defensive equity holdings, which have lagged the equity market over the past year or so. We are however confident that this will correct over longer, more meaningful time periods.
We currently view global equities to be the most attractive asset class by far and the fund's equity exposure of around 73% reflects this fact. As reference points, we would expect the average equity exposure over a five-year cycle to be around 65% and the maximum equity exposure to be 75%. After 10 years of global share prices being flat (at a time when earnings have grown significantly), valuations have contracted and as a result one can buy very high quality US or global businesses on very attractive ratings. The list of opportunities is long, but a sample of the fund's current top 10 holdings provides some flavour in this regard.
-HEINEKEN is the world's third largest brewer (after Anheuser-Busch Inbev and SABMiller). It is the global leader within the high margin premium sector and fastgrowing emerging markets contribute 50% of its revenue. In addition to a revenue line that in our view will show decent growth over the next few years, we don't believe the company has been managed efficiently from a cost point of view, but that this is beginning to change. We therefore expect operating margins to improve substantially over the next few years. Despite these positive fundamentals, Heineken trades on just 12.5x the free cash flow we believe it will generate over the next oneyear period.
-SAFEWAY is the third largest supermarket retailer in the US (after Walmart and Kroger). Between 2004 and 2008, the company invested heavily in store improvement which is now largely complete. As a consequence the business is generating significant amounts of free cash flow. Operating margins are at 20-year lows and the company should benefit from rising inflation in the US. Safeway also continues to buy back large amounts of its own (undervalued) shares. Yet, one can currently buy the shares on less than 10x free cash flow.
-VODAFONE is one of the largest mobile telecommunications companies in the world. While mobile penetration is very high in most of the markets it operates in, we are very positive on the prospects for mobile data which we believe should result in some acceleration of revenue. In addition to this Vodafone currently receives no dividends from its US business (Verizon Wireless), though we believe it is just a matter of time before this will change. As a result large additional cashflows are likely to head Vodafone's way soon and a substantial part of this could be returned to shareholders in the form of increased dividends or share buy-backs. Vodafone today trades on less than 10x free cash flow and on a dividend yield of around 5.5%, which we feel is very attractive given the factors mentioned above.
We acknowledge that there are still many uncertainties in the world (e.g. Greece's debt problem, US deficit, weak global economic growth and inflation risks globally). We however continue to find valuations of many global equities very attractive and, as always, valuation overrides everything else. In addition to this, the five-year free cash flow streams of businesses like Heineken, Safeway and Vodafone are unlikely to be too affected by global economic outcomes, yet the share prices continue to languish, and indeed move down on any bit of negative economic newsflow. This is in our view the function of markets that are dominated by short-term focused 'investors' who think in terms of months and not years. At the same time this provides opportunity for a more patient investor. Besides global equities, we also feel that a number of listed property stocks are attractive and we added to the fund's holdings in this area, with the result that around 5.5% of the fund is invested in listed property. The focus of the fund's investment is in Asia (Singapore in particular and to a lesser extent Japan and Australia) and the average yield of the fund's holdings is north of 6% and most of the holdings are trading at or below net asset value. We believe that globally government bonds have benefited from a flight to safety and as such are overvalued. This ranges from US to German to UK government bonds. As a result the fund currently has zero exposure to government bonds as we feel they present a high probability of capital loss. A small portion of the fund (4%) is invested in selected corporate bonds where we feel the yield compensates one for de-rating risk. Overall we are very optimistic on the outlook for returns from the fund and believe that given current valuation levels, a 10% - 11% p.a. return in USD from the fund over the next few years is well within reach.
Portfolio manager
Gavin Joubert
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Coronation Global Managed (USD) comment - Mar 11
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Tuesday, 24 May 2011
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Fund Manager Comment
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The past few months saw disruptions in the Middle East and North Africa as well as the tragic earthquake, tsunami and nuclear threat in Japan. These events resulted in major swings in sentiment and in global markets. With this backdrop, the fund appreciated by 2.9% (in US dollar) in the first quarter of 2011. Since the fund launched just over a year ago (1 March 2010), the fund's return in dollars is an annualised 9.7%. The global events over the past few months have had little impact on our long-term views. We value businesses based on the earnings streams that we believe they will generate over the next 5 years or longer. In this regard we don't believe that events in either the Middle East or Japan will have an impact on the long-term earnings power of Heineken for example. A few months ago we believed that Heineken was worth around 50 euros a share (compared with the current 37 euros) and today we still believe that Heineken is worth around 50 euros a share. The most important byproduct of the disruptions in the Middle East is the oil price. A higher oil price (should it be a sustainably higher oil price) could have an impact on the valuations of a few of the fund's holdings, but it is our view that the recent spike in oil prices has been driven by speculation and short-term money, and does not represent a new permanently higher level. With regards to Japan, the fund had very low exposure (3% of fund) prior to the tragic events the country had to face. We did increase the fund's Japanese exposure marginally to 5% of fund, mainly through buying more defensive businesses (convenience retailers, drugstore chains) that had declined by 20% or more, yet who will be largely unaffected by what is happening. Whilst there are a handful of Japanese stocks that are clearly attractive, in general we continue to hold the view that there is better value in the US and Europe. The long-term fundamentals of Japan are poor (ageing population, deflation and high debt levels), the currency is arguably overvalued and Japanese management teams continue to prefer to build empires instead of focusing on doing what is best for shareholders. Additionally, whilst Japanese companies look cheap on Price/Book valuations (1x P/B), that single metric in isolation is misleading in our view as one has to take into account the ROE that Japanese companies generate (the lowest in the world) as well as the fact that many Japanese companies are serial acquirers (and as such the book value is overstated due to Goodwill). Lastly, reality is that in most cases the large cash balances are unlikely to be returned to shareholders. On other valuation metrics (P/E and Free Cash Flow yields), the valuations of most Japanese companies are generally not that attractive, either in absolute terms or when compared with their Western (US/European) equivalents. Besides marginally adding to the fund's Japanese exposure, we also bought new positions in two of the global luxury goods companies, LVMH and PPR. Both companies experienced sharp declines due to their Japan exposure (approximately 10% - 15% of revenue) as well as concerns over global growth. LVMH are the owners of Louis Vuitton, Moet Hennessy and a whole range of other luxury goods brands, including having a large stake in Hermes and potentially owning Bulgari, which they have recently offered to buy. Scale is important in the luxury goods industry and LVMH are one of the key consolidators. The revenue and earnings streams of LVMH have also proven to be more resilient to economic downturns than that of a luxury goods company like Richemont, whose focus is more on watches and jewellery as opposed to LVMH's focus on fashion and leather goods. Although we believe Richemont is a great business, in our view the share did not get cheap enough during the recent turmoil, whereas LVMH and PPR did. PPR is much smaller than LVMH and their main brand is Gucci, which generates the majority of the group's profits. We believe the long-term prospects for the global luxury goods companies are very positive, driven by emerging markets where millions of individuals every year move into the target market of these companies. Today we estimate that between 40% and 50% of LVMH's profits come from emerging markets (directly and through travel). At the time of purchase, PPR was trading on 12x 2011 earnings and LVMH on 16x 2011 earnings. LVM's short-term valuation metrics may not appear particularly appealing, but we believe that this is a very high quality business that can grow earnings in the double digits for many years to come. We continue to hold the view that equities are by far the most attractive asset class globally and as a result the equity exposure of the fund (73%) continues to be at the high end of its expected range. We are also finding decent selected value in listed property and continued to add exposure in this area over the past few months to the point where it now makes up 5.5% of fund. We believe that global bonds are overvalued and have no exposure in this area. Around 4.5% of the fund is invested in selected corporate bonds where we feel the yield compensates one for the potential de-rating risk.
Portfolio manager
Gavin Joubert
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Coronation Global Managed (USD) comment - Dec 10
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Thursday, 24 February 2011
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Fund Manager Comment
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After launching in February 2010, the fund ended the year with a return of +7.6% in USD. The track record of the ZAR version of the fund (which is managed on the exact same basis as the USD fund) is slightly longer. Having launched in October 2009, this fund has generated an annualised return of 11.7% since inception, resulting in 0.7% outperformance of the benchmark (60% MSCI World/40% Global Bond index).
We continue to believe that global equities are very attractive. As a result, the fund's equity exposure of around 73% is towards the top end of the range we would expect for the fund. Large cap global/US/European equities in particular are in our view very attractive and a large part of the fund is invested in this area (the likes of Heineken, Microsoft, Johnson & Johnson, Colgate Palmolive, Tesco and Wal- Mart).
There were no substantial changes to the equity part of portfolio over the past few months. We did make some smaller changes, including adding to the fund's position in Heineken to the point where it is now the largest individual position at 3% of fund. Heineken are the owner of a number of premium brands, including the Heineken brand (the largest contributor to earnings), Amstel and Sol. Almost half of the group's business is now in emerging markets and Heineken have the largest percentage of beer volumes coming from premium brands when compared with the three other major global beer companies (Anheuser-Busch Inbev, SABMiller and Carlsberg). The EBIT (operating profit) of premium beer is around 70-80% higher than that of mainstream brands. Yet Heineken, with the largest exposure to premium brands, have the lowest operating margins in the industry (15% EBIT margin compared to the 17% of SABMiller, 20% of Carlsberg and 30% of AB Inbev). There are a number of reasons why Heineken will never achieve the 30% operating margins that AB Inbev enjoy, but we do believe that Heineken will be able to lift their margins over time to closer to the 17-18% EBIT margin level - if not higher. Heineken now trades on around 10x this year's expected free cash flow, which we believe is very attractive for an asset of this quality.
The question is often posed: why should I invest in global equities when they have given 10 years of 0% return? Our response is that this is exactly why one should invest in global equities today: because share prices have done nothing for 10 years (during a period when earnings for most companies have grown significantly) means that valuations have come down considerably over the past 10 years, making many global equities attractive today. It must also be remembered that 10 years ago the world was in the midst of the one of the biggest bubbles ever seen (TMT) and that valuations were crazy in many cases. The starting point of the last 10-year period is therefore very high from a valuation point of view and investors who have seen no return from global/US equities over the past 10 years largely have themselves to blame as they were investing offshore at a time when valuations were silly.
If we then take Cisco as an example: the share price in 2000 was $38.25. Today the share price is $20.55, representing a 46% decline over the past 10 years. Earnings, however, have increased materially over the past 10 years: in 2000 Cisco generated EPS of $0.48 and last year it earned $1.66, representing a 246% increase in earnings over the past 10 years (or 13% p.a. increase in EPS). Operationally, Cisco has therefore performed very well as a business, yet an investment in Cisco 10 years ago would have resulted in an investor losing almost half of their capital. The reason for this is simple: valuations in 2000 were extremely high and Cisco traded on an extreme 81x earnings. Today, given the share price decline together with the growth in earnings over the years, Cisco trades on a very attractive 12.4x earnings. In addition to this, the company has a substantial net cash balance of some $25 billion. The entire market capitalisation of the company is $113 billion, meaning that cash makes up 22% of its market capitalisation. Given that cash is effectively earning no return (and as such is not contributing to earnings) one should adjust the P/E for this cash in which case the P/E of 12.4 decreases to a P/E of 9.7 - a far cry from the 81x earnings Cisco traded on in 2000! The other companies tell a similar story and highlight why we believe selected global equities are so attractive today.
Besides global equities, we continue to find selected value in listed property and corporate bonds, with between 3-4% of the fund invested in each of these areas. We hold some gold, although this position was reduced over the past few months. We also continue to believe that government bonds are unattractively valued and as a result we have a 0% position in this area with the balance of the fund being invested in cash, largely in a mix of USD and EUR.
Portfolio manager
Gavin Joubert Client
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Coronation Global Managed (USD) comment - Sep 10
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Monday, 8 November 2010
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Fund Manager Comment
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The general nervousness and see-saw movements in markets continued to prevail this past quarter. This year we have seen markets sharply appreciate, followed by a big correction and then another upward move. All in all, global markets are marginally positive in USD year-to-date. Global bonds, particularly emerging markets (EM) bonds, have continued to appreciate, and as money floods into EM bonds in search of yield EM currencies continued to strengthen. All in all, global equity markets are marginally positive year-to-date. The fund launched in February of this year and since inception the fund has appreciated by 4.7% in USD. We continue to believe that globally bonds are overvalued and getting more so by the day. The fund has nothing invested in government bonds and only a small amount (3% of fund) invested in corporate bonds. We are finding good value in selected listed property stocks and around 6% of the fund is invested in this area. We continue to believe that there is very good selected value in global equities, particularly in the large cap high quality companies and a large part of the fund is invested in this area (Johnson & Johnson, Coca-Cola, Wal-Mart, McDonalds, YUM Brands, Colgate Palmolive, Heineken and Tesco). Given the attractive valuations of so many of these businesses, the equity exposure of the fund (mid 70% level) is at the high end of where we would expect it to be over time. We also believe a number of the US technology companies are very attractive and the fund has a number of holdings in this area (Symantec, Microsoft, Oracle, Hewlett Packard, IBM, Google and Cisco). Valuations for most of the companies mentioned are at multi-year lows after 10 years of flat global equity markets. IBM's share price for example just recently passed its previous all-time high in 1998. So IBM's share price has done nothing for 12 years! The starting point of course was a high valuation, driven by the TMT bubble. What is more important is that today, after growing the business year after year at the same time that the share price did nothing, IBM trades on just over11x free cash flow. We think this is very attractive for what we would consider to be an above average business. We also continue to find new ideas, particularly in the US, where the market seems to get more and more short-term focused every day, which of course creates opportunities if one has a longer time horizon. An example of this in our view is the recent rapid share price declines of the world's two largest card processors - Mastercard and Visa. We were buyers of both shares (together they make up 4% of the fund today) as we believe the market is focusing too much on one issue and ignoring all of the positives of these businesses. Although the drivers of the two companies are very similar, our discussion below will focus on Mastercard as it is the larger position. The issue that the market is currently focusing on is that of regulation, specifically in the US. A new bill was tabled in the US called the Durbin amendment, which proposes a number of new regulations that will negatively impact the card processors. Whilst we agree with the fact that the proposed changes will negatively impact the processors, it is our view that the impact is likely to be manageable. More importantly, it is also our view that this impact is more than priced in following the share price declines. We would also make the point that whilst it is possible for regulatory pressure to increase in countries other than the US, the interchange fees (one of the key areas being targeted by the proposals) in the US are at the high end of all markets globally. So at this point, the regulations are specific to the US, and in fact are specific to debit cards only. In this regard, markets outside of the US (in particular emerging markets) are growing much faster than the US market. If we consider Mastercard, emerging markets already make up around 30% of revenue and this percentage is increasing rapidly. Total non-US revenues for Mastercard today are 55%, meaning that already the US makes up less than half (45%) the business. The US contribution will continue to decline given the fact that credit and debit card purchase volumes are growing twice as fast outside the US as they are in the US. Mastercard's US revenue grew at 10% CAGR from 2006-2009 whereas their international revenue grew at 21% CAGR over the same 2006-2009 period. Credit and debit card take-up in emerging markets (and even in Europe) is far below that of the US and will undoubtedly increase at a rapid rate over the next several years. Today for example, 40% of all consumer spend in the US is done by credit or debit card (this percentage on its own will increase over the next several years) whereas in a country like Brazil (whose economy is growing at over twice the rate of the US), only 20% of consumer spend is made using a credit or debit card. Besides having very favourable long-term drivers (a switch from paper to plastic), the card processors have a largely fixed cost base (meaning that revenue increases translate into even higher profit increases, and vice versa of course) and they also require very little capital to grow. They also generate large amounts of free cash flow and convert all of their earnings into free cash flow. Mastercard have provided 2011-2013 revenue guidance in the low doubledigits and EPS growth of 20%+. We would be more conservative than this and feel that EPS growth of 15% over the next number of years is very achievable, taking into account downward pressure in the US. Today Mastercard trades on approximately 15x this year's earnings excluding their net cash position (and was trading at a much lower valuation than this at the fund's average purchase price). We feel this is very attractive for a business of this quality.
Portfolio manager
Gavin Joubert
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Coronation Global Managed (USD) comment - Jun 10
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Monday, 6 September 2010
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Fund Manager Comment
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Equity markets increased for the first few months of the year before the European debt crisis led to fears of a double-dip recession and a resultant significant decline in the markets over the past few months. The MSCI World Index has now declined by almost 10% year to date. Similar to the market decline of September/October 2008, we believe that the selling has now become indiscriminate (largely due to hedge fund 'de-risking', i.e. selling equities at any cost) and this creates significant opportunity which the fund has been taking advantage of. As a result the fund's equity exposure is at the top of its expected range at around 75%.
'Double-dip' has now become consensus. We don't believe that we can forecast the economy over the shorter term with a high degree of conviction and so we spend our time focusing on the individual stocks in the portfolio and the earnings streams we believe they will generate over the longer term (5 years). We then value those long-term earning streams and buy those shares that are trading well below what we believe they are worth. In this regard, we don't believe that the longer-term (5 years) earnings outlook, and hence fair values for Pfizer, Johnson & Johnson, Teva, CVS Caremark, Safeway, Time Warner Cable, YUM Brands, Coca- Cola or Kraft (all portfolio holdings) have changed very much over the past several months. Yet in most cases their share prices are lower and therefore their valuations are more, not less, attractive.
In terms of portfolio activity, a number of the large cap US technology stocks have become attractive again with many of them now trading on around 10x earnings ex their net cash balances. We added small positions in Microsoft, Cisco, Oracle and eBay after having sold them earlier in the year. We also continue to believe that the large cap pharmaceutical stocks are pricing in negative growth into perpetuity and we added to the fund's pharmaceutical positions and now own a handful of them, including Johnson & Johnson, Pfizer, Merck and Novartis.
Spain is one of the markets investors hate most today. When investors are just about throwing up equities in revulsion it can be very profitable to invest in these equities and we believe that Banco Santander, the largest bank in Spain, is one such opportunity. Over the past several years Banco Santander have expanded their operations over Europe and Latin America to the point today where only around 20% of earnings actually come from Spain. The Spanish business is where the risk primarily sits and in this regard we believe that the bank has adequate provision against further defaults in Spain. The Latin American business (operations in Brazil, Mexico and Chile which today contribute around 40% of earnings) is the jewel in the crown and is growing its NAV by 20% p.a. as a result of low banking penetration, economic expansion and rising disposable incomes. There are undoubtedly risks attached to Banco Santander, but at the fund's purchase price (1.2x Price/ Tangible Book Value, 7x earnings and a dividend yield of 8%) we believe that we were being more than compensated for such risks and that there was substantial potential upside.
Within emerging markets valuations of a number of stocks have also started to become very attractive again and we added to the fund's holdings in two of the Chinese internet gaming companies, Netease.com and Sohu.com after they experienced share price declines of 30% due to concerns of regulatory intervention and slowing growth.
Internet penetration (the number of individuals who have access to the internet) has increased significantly over the past several years, as has the Chinese online gaming industry.
There are currently over 400 million internet users in China and internet penetration is now approaching 30%. We believe that it will ultimately reach 50% or 60%, and could go a lot higher. This means that another 300 to 500 million internet users will be added in China over the next several years. Internet gaming is a very popular, mainly social, cheap pastime in China. The industry has been growing by well over 30% p.a. over the past several years driven by increasing internet penetration and rising disposable income levels. Whilst we do not expect these historic growth rates to be repeated, we do believe that the industry will continue to show double-digit growth. All of Netease.com's earnings and over half of Sohu.com's earnings come from internet gaming. Both companies have large net cash positions (over 25% of its market capitalisation in the case of Netease.com and almost 35% in the case of Sohu.com) and both trade on low double-digit ratings on this year's earnings, which we believe is very attractive and more than prices in the market's current concern of regulatory risk.
Global bonds have continued to appreciate, with US and German bonds now yielding less than 3%. Given current government debt levels, new funding that will be needed, historical valuation ranges and our fair values for these bonds, we believe that they are ridiculously over valued and are an accident waiting to happen. As such, the fund holds no government bonds, preferring cash instead. Although cash may be yielding nothing, it also does not carry the risk of a capital loss that government bonds do. Our negative view on global bonds means that we are cautious on corporate bonds as well and the fund therefore only holds a small position in corporate bonds.
We believe that there is selected value in listed property stocks, mainly in Asia, and the fund has 6% in total invested in several property stocks that are yielding between 6% - 8% and in all cases trading at or below NAV.
After 10 years of no returns, we believe that global equities are very attractive and that the fund, with slightly over 70% of its assets invested in global equities, is well placed to generate above average returns over the next few years.
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