|
|
Coronation Global Opportunities Equity Fund - News
|
|
|
Coronation Global Opp Equity comment - Mar 18
|
|
Wednesday, 13 June 2018
|
Fund Manager Comment
|
The fund declined 0.6% against the benchmark decline of 1.0%, bringing its rolling 12-month performance to 15.9% versus the 14.8% returned by the MSCI All Country World Index.
After an unprecedented 16 months of consecutive gains, it was not surprising that global equities experienced a sharp rise in volatility at the end of the first quarter of 2018. Initially, there was a sharp selloff in February. While the monthly decline in US equities was 4.2% in February, the fall approached 10% at one point during the month. The MSCI Emerging Markets Index fared even worse, with a decline of 4.6%. These falls were essentially due to an equity bull market that has risen for a very long time without any material correction. The trigger for the sell-off was most likely concern about rising inflation and bond yields, with the 10-year US Treasury yield having risen from 2.41% at the end of last year to a high of 2.95% by mid- February. Commodity prices fell along with other risk assets, with Brent Crude and natural gas down by 6% and 7% respectively during February. However, the heightened volatility during late March and early April was due to a more specific event - the escalation in retaliatory exchanges between Washington and Beijing regarding terms of trade. This elevated concerns of a nascent 'trade war'.
Japan was the best performing region this quarter, rising 1.0% (in US dollar terms). Pacific ex-Japan delivered the weakest return, declining by 3.7% (in US dollar terms). Europe lost 1.9% (in US dollar terms) and North America weakened by 1.0%. Emerging markets advanced 1.1% (in US dollar terms), outperforming developed markets. On a look-through basis, the fund is overweight North America and emerging markets, and underweight Europe and Japan.
Amongst the global sectors, information technology (+3.2%) and consumer discretionary (+1.5%) generated the best returns. The worst performing sectors were telecommunications (-6.4%), energy (-6.1%) and consumer staples (-5.7%). On a look-through basis, the fund benefited from its overweight positions in information technology and consumer discretionary as well as it underweight positions in utilities and telecommunications. Its overweight positions in consumer staples and materials detracted from performance.
The fund's relative outperformance this quarter was largely a result of good performance across the portfolio. Three stand out performers were Egerton Capital, Vulcan Value Partners and Tremblant Capital.
Egerton Capital returned positive 2.9% over the quarter, with strong performances from Airbus (+13%), as its order book rose strongly; Adobe (+23%), after its ongoing move to the cloud gave rise to a strong earnings announcement; and Adidas (+18%), having announced a good set of results and a large share buyback. An overweight position in information technology also boosted returns.
Vulcan Value Partners returned 2.9% for the quarter, also benefiting from its position in Airbus and a large exposure to the information technology sector. It also benefited from a rise in its insurancerelated positions after Axa bought XL Limited. Another top position, GKN, was also subject to an offer, from Melrose, and rose sharply during the period.
Tremblant returned 2.2%. Its large exposure to consumer discretionary stocks boosted returns even though CBS, one of its top holdings, declined by 13% over the period. Palo Alto Networks (+25%) benefited from the recent US tax cuts as well as improved earnings, while Fineco Bank (+14%) had strong deposit inflows and margin improvement.
Maverick Capital, which has had a tough time in the recent quarters, returned positive alpha this past quarter. Its large exposure to healthcare has been the most significant driver of underperformance over the past 12 months, especially their holding in Shire Pharmaceutical. After large losses in Shire, Maverick reexamined their investment thesis, decided it remained intact and maintained the position. This was rewarded in March when Takeda announced its intention to bid for Shire and Shire's share price rose strongly. Maverick also benefited from Envision (+11%) and Adobe (+23%).
Contrarius Global Equity also had a good quarter. Like Tremblant, it has benefited from its large exposure to the consumer discretionary sector, especially the bricks and mortar stores such as Macy's (+20%), Dine Brands (+30%) and Abercrombie & Fitch (+40%), which rebounded sharply. Twitter, a long held position which has disappointed since its listing, also rose strongly after it released a robust set of financial results.
Outlook
Notwithstanding recent concerns and increased volatility, we believe that the bull case for equities will endure for a while yet. The synchronized global expansion seems set to continue for several years, inflation remains moderate on a global basis, central banks are still providing ample liquidity, and equities continue to look attractively priced relative to government bonds. We believe that the fundamental outlook for global growth and interest rates is little changed from where it stood at the start of 2018. Global economic data continue to reflect an impressive, broad-based global economic expansion. However, there is sufficient momentum in the global economy that labour and product market constraints in developed markets should push both wage and core CPI inflation higher in coming quarters, along with expectations about central bank policy rates.
|
| |
|
Coronation Global Opp Equity comment - Dec 13
|
|
Thursday, 16 January 2014
|
Fund Manager Comment
|
In what was a tough year for emerging markets (MSCI EM index -2.27%), the fund generated a return of +13.84% and in doing so outperformed the market by 16.11%. Whilst we are naturally pleased with such large outperformance, we would point out that 1 year is a very short time period and ideally one should look at 5 year+ periods when evaluating performance. In this regard, since the fund launched 5.5 years ago in July 2008, it has generated a return of +9.12% p.a. which is some 7.10% p.a. ahead of the market's return of +2.03% p.a. over this same period.
For the calendar year, nine of the fund's positions each contributed more than 1% to the fund's overall return of 13.84%, whereas only three positions detracted by more than 1%. In terms of positive contributors the nine largest contributors were Naspers (+63.6%, contribution of 3.0%), Magnit (+66.6%, contribution of 2.7%), Baidu (+78.2%, contribution of 2.2%), Porsche (+33.2%, contribution of 2.2%), Great Wall Motors (+94.6%, contribution of 1.8%), Brilliance China Automotive (+33.1%, contribution of 1.6%), Axis Bank (+27.1%, 1.4% contribution), Cognizant Technology Solutions (+32.7%, contribution of 1.3%) and Coca-Cola Hellenic (+66.9%, contribution of 1.2%). Two detractors of note were Daphne (-66.5%, negative contribution of 3.5%) and Marisa (-50.9%, negative contribution of 1.8%).
The point has been made that we have done well over time because a large part of the fund has been invested in high-quality consumer stocks that have done well. We disagree with this point and a perusal of this year's big contributors serves as backup. In this regard, of the nine largest contributors, only two (Magnit and Coca-Cola Hellenic) could be classified as traditional high-quality consumer companies. Of the other seven, no less than three are car companies (not exactly your traditional high-quality consumer company), three are technology companies (although one of these, Naspers, is strangely classified by MSCI as a consumer company) and the final one is a bank. The fact is that we haven't actually owned most of the very high-quality emerging market consumer stocks (BIM, ITC, Hindustan Unilever, Ambev, Walmex, Femsa, Shoprite etc) in all cases because of valuation. And whilst all of these stocks have done very well over long periods of time, owning them over the past year has generally been a poor investment strategy as they derated from absurd valuation levels. As a result, a few of them are now starting to look somewhat more interesting to us. We continue to do work on them and wait patiently for the required margin of safety before buying.
We were reasonably active over the past few months and sold out of six positions as they continued to appreciate strongly and reached or approached fair value (Great Wall Motors, New Oriental Education, SABMiller, M Dias Branco, YUM Brands and Colgate Palmolive). Whilst we take a long-term (5 years+) view when thinking about, modelling and valuing companies, we are certainly not 'buy and hold forever' investors: if a share approaches and reaches fair value, we will typically be selling, which is exactly what happened in the case of all six of the sells above. At the same time, we bought five new stocks of note: Netease (2nd largest online gaming company in China), Credicorp (largest bank in Peru), Eurocash (Poland's leading cash and carry retailer), Carlsberg (3rd largest beer company in the world) and Gerdau (Brazil's largest steel company). Over the past few months we also added to the fund's position in Porsche, which is now the single largest position at 8.2% of fund. Even though Porsche has appreciated by around 25% 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:
- 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) that 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 adjacent graph). 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, and as such we have taken all of the fund's exposure through Porsche.
Whilst the news flow and equity market performance from emerging markets continue to be poor and a number of EM economies are undoubtedly going through a tough period, we are able to find selected good value in individual companies. The weighted average upside (share price to fair value) in the portfolio is currently 50.4%, which is broadly in line with the average of 50.1% over the past 3.5 years (the low was 31.2% in January 2013 and the high was 87.9% in September 2011). In early December two members of the team were in Brazil where they met with management of most Brazilian portfolio holdings and further research trips are planned for late January (Thailand and Philippines), February (India) and March (Brazil again, as 23% of the fund is now invested in Brazil).
|
| |
|
Coronation Global Opp Equity comment - Dec 12
|
|
Tuesday, 26 March 2013
|
Fund Manager Comment
|
The fund returned 4.0% for the quarter compared to the benchmark MSCI World Index (dividends reinvested) return of 2.6%. For a rolling 12-month period, the fund's return of 18.2% is ahead of the benchmark's 16.5%. Global markets ended the year on a good, albeit volatile, note returning 2.6% for the quarter and a strong 16.5% for the year. The months of October and November were largely affected by negotiations between Greece and the Troika regarding the payment of the next (previously agreed) bailout tranche. It was a difficult period, but further austerity measures from Greece and some concessions from the rest of Europe and the IMF gave rise to another last minute resolution which buoyed European markets. In the US and China, political events meant a new regime in China and a second term for President Obama in what was ultimately a comfortable re-election. While worries over a prolonged recession in China receded, resolution of the US 'fiscal cliff' quickly became the centre of post-election attention. The stand-off continued throughout December but an agreement on taxes was seen as positive and markets rallied strongly on this news into early 2013. Japan also held an election which resulted in Shinzo Abe becoming Prime Minister for a second time. With a coalition majority, Abe's focus on inflation targeting, economic stimulus and aggressive monetary policy during the election are creating real interest in Japan, a long ignored investment market. In terms of regional equity performance, Europe was the best performing region, rising 7.1% (in US dollar terms), while north America performed the worst, falling marginally at - 0.1% (in US dollar terms). Asia ex-Japan gained 6.1% (in US dollar terms) and Japan gained 5.8% (in US dollar terms). The fund's regional positioning had a significant positive impact over the quarter. Overall the underlying funds also had a positive impact on performance over the quarter, driven by the global and US oriented funds, while the Europe and Japan oriented funds detracted. The Coronation Global Emerging Markets Fund was a stand-out performer during the quarter followed closely by Harris US Concentrated. Both were major contributors to performance. Cantillon Global Value and Vulcan Value Partners also outperformed over the quarter. After a good run of outperformance, both our Europe-focused funds, Egerton and Memnon, marginally underperformed as did both the Japan-focused funds, Polar and Morant Wright.
Outlook
The market rally on the 'fiscal cliff' tax agreement may be overly optimistic as negotiations still need to take place over increasing the US debt ceiling, which will shift the focus to spending cuts. We therefore expect much of the same with regard to market volatility on daily news flow. However, there is a sense of a slow healing taking place in the various regions and this, supported by favorable monetary policy should continue and hopefully gather pace during 2013. The economic data out of the US is generally more positive and we expect that it will recover at a more rapid rate than Europe and Japan, which still have some way to go in dealing with the financial crisis.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Sep 12
|
|
Tuesday, 11 December 2012
|
Fund Manager Comment
|
The fund returned 7.3% for the quarter, against 6.8% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 18.6% lags that of the benchmark's 22.3%. The MSCI World Index rose 6.8% over the quarter, masking a fairly volatile period during which central banks announced further quantitative easing programmes. The European credit crisis once again dominated global equity markets, but so did the looming 'fiscal cliff' in the US and the economic slowdown and regime change in China. The euphoria following the latest European rescue deal agreed on 29 June was short lived as yet again the market questioned the feasibility and practical implementation of the proposed solution. Stubbornly high unemployment and mixed signals on the state of the US economy added to the concerns causing markets to seesaw during July. This was until Mario Draghi, President of the European Central Bank (ECB), announced that the bank would 'do whatever it takes' to prevent the eurozone from collapse. His plan of unlimited bond purchases for countries undertaking agreed austerity budgets, was welcomed by the markets. Shortly thereafter Ben Bernanke, Chairman of the US Federal Reserve, announced the much speculated on QE3 in the form of bond purchases totaling $40 billion per month for an indefinite period, and until there is substantial improvement in the US employment market. This announcement caused another substantial rally. In terms of regional equity performance, Asia ex-Japan, was the best performing region, rising 11.0% (in US dollar terms), while Japan performed the worst, gaining only 3.8% (in US dollar terms). Europe gained 8.8% (in US dollar terms) and the US gained 6.8%. The fund's regional positioning had a positive impact over the quarter. The managers also had a marginally positive impact for the quarter. Notable performances came from Vulcan Value Partners, which again outperformed its benchmark this quarter. Contrarius Global Equity also had a good quarter after a difficult start to the year. Detractors for the month included Vanguard Primecap, which had a very weak quarter after its strong first half of year. Our two Japan funds, Morant Wright and Polar Capital also underperformed, as did Memnon in Europe. During the quarter, we redeemed from IVI Europe and Indus Select and reinvested the capital in Sands Capital Growth Fund and Vulcan Value Partners Fund.
Outlook
The stimulus measures announced by the US Fed and ECB should support market sentiment going forward, and although they do strengthen concerns on future inflation, this is not a real concern at this point in time. However, as per recent history, the brinkmanship in Europe continues as Spain holds off on implementing economic measures, which would allow the ECB to purchase bonds under Mario Draghi's plan. With further aid to Greece still to be decided on and an American presidential election taking place in November, the fourth quarter is likely to be volatile. As economies are being held back by austerity measures and unemployment, governments are becoming more pro-growth and we expect policies to reflect this. While downside risks remain, and market participants continue their nervous stance, we believe equities offer reasonable upside compared to other asset classes.
Portfolio manager
Tony Gibson Client
|
| |
|
Coronation Global Opp Equity comment - Jun 12
|
|
Thursday, 26 July 2012
|
Fund Manager Comment
|
The fund returned -6.2% for the quarter, against -4.9% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of -4.8% is behind that of the benchmark's -4.4%. The European sovereign credit crisis was once again the theme of the past quarter. A second election in Greece, in theory a vote to remain in the euro, gripped the markets only until the focus shifted to Spain and Italy where bond yields rose. Investors didn't wait to see if they were indeed too 'big to bail out' and a flight to safety ensued, causing risk assets to decrease sharply. Weaker data points out of China and the US added to these fears. During June, significant geopolitical pressure on the euro countries, most notably Germany, led to yet another bailout, this time for Spanish banks, but more importantly a clear intention by the euro countries to move towards greater fiscal unity. The late night, last minute deal was welcomed by the markets which rose significantly on the last day of the quarter. The rally, however, was not enough to erase earlier declines and global equity markets declined by 4.9% over the quarter. In terms of regional equity performance, North America was the best performing region, falling only 3.4%, while Japan performed the worst, falling 7.3% (in US dollar terms). Asia ex-Japan declined 4.9% (in US dollar terms) and Europe declined 7.1% (in US dollar terms). The fund's regional positioning had a negative impact over the quarter. The impact of the managers was neutral this quarter with good performance from some being offset by weaker performance from others. This was a consistent theme across all regions. Vanguard Primecap rebounded from a period of weak performance with a very good quarter, creating significant alpha for the fund. This was offset by a very weak quarter from Harris Concentrated, while Vulcan Value was slightly ahead of the S&P 500 Index. The global managers marginally detracted from performance. Cantillon had an excellent quarter ending well ahead of the MSCI World Index, but this was offset by weaker returns from Contrarius and Nedgroup Investments Global Equity Fund (managed by Veritas Asset Management). In Europe strong returns from Egerton and IVI European funds was offset by a poor quarter from the Zadig Memnon Fund. During the quarter we added to our investments in Sands Capital Growth Fund and Vulcan Value Partners Fund. The European crisis is having a negative impact on the global economy, and with China and the US also showing signs of weakness, central banks are on standby for more monetary easing should it be necessary. This should provide some support for equities in the short term. However, as with the many previous euro agreements and bailouts, while the new agreement is a welcome step forward, the crisis is not necessarily resolved. Implementation will take time and details need to be negotiated. We therefore expect more volatility in the medium term.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Dec 11
|
|
Tuesday, 20 March 2012
|
Fund Manager Comment
|
The fund returned 4.4% for the quarter, against 7.7% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of -7.7% is lagging that of the benchmark return of -5.0%.
The quarter was again dominated by the ongoing European sovereign debt crisis. The new governments in Greece, Spain and Italy provided impetus to fiscal austerity in those countries, but an attempt to create greater fiscal unity within Europe was struck down by a British veto, and an agreement between the other 26 nations appears increasingly uncertain. Globally the crisis weighed heavily on sentiment and markets, however economic data from the US is moving in the right direction and is expected to improve in 2012, an election year.
In terms of regional equity performance, North America was the best performing region, rising a strong 11.1% over the quarter. Japan performed the worst, falling 3.9% (in US dollar terms), while Asia ex-Japan and Europe rose by 6.0% and 5.5% respectively (in US dollar terms). The fund's regional positioning had a significant negative impact on overall performance over this period.
Overall, our managers had a significant negative impact on performance. This was largely a result of volatile markets and increased uncertainty that led to increased exposure to cash and less exposure to what was ultimately a strong equity market performance.
All of the global managers underperformed over the quarter, especially Cantillon Global which sacrificed some of its exceptional performance achieved in the third quarter of 2011.
Polar Japan and Morant Wright also marginally underperformed as did Indus Select in Asia. IVI Europe had a very good quarter, generating strong performance and Memnon Europe also had a positive impact on performance over the period. In the US, Harris Concentrated Fund also finished ahead of the index.
During the quarter, we redeemed from Edinburgh Partners Europe and replaced it with Sands Capital Growth Fund and Vontobel Emerging Market Fund.
Sands is a concentrated, valuation-driven growth fund run by Sunil Thakor and David Levanson. The firm manages approximately $18 billion across all strategies and the portfolio managers are supported by a team of 25 analysts and research associates. Since inception, they have generated an annualised alpha of 6.3%.
Vontobel has a large team of analysts looking at stocks for their regional and global strategies. The Emerging Market Fund is run by Rajiv Jain, the firm's head of Portfolio Management who has run the fund for more than 10 years. Although also growth orientated, the firm has a strong valuation process coupled with a long-term investment horizon and low turnover. The fund has generated 4.2% annual alpha over a 10-year period.
Outlook
2011 was a tough year for active, valuation-driven managers such as those with whom we place capital. With market volatility at extreme levels and short-term momentum dominating stock prices, our managers were unable to generate their historical levels of return. However, equity markets remain attractively priced and we are confident that our managers will provide good returns once some semblance of normality returns. This may not happen in the short to medium term as Europe continues to resolve its crisis, but there are some signs that conditions are improving, particularly in the US.
|
| |
|
Coronation Global Opp Equity comment - Sep 11
|
|
Thursday, 22 December 2011
|
Fund Manager Comment
|
The fund returned -13.9% for the quarter against -16.5% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of -4.9% is behind that of the benchmark's -3.8%. The quarter was characterised by some of the most extreme market volatility ever experienced. The European Sovereign credit crisis was again at the forefront of market concerns as a Greek default was widely anticipated and the contagion effect spread to other European states, especially Italy. Another seismic event was the downgrading of US government debt after a prolonged negotiation over the extension of the US debt ceiling. This was the trigger for a mid-August sell-off. A slowing of economic activity in Europe, the US and even China exacerbated an already nervous market. Sharp sell-offs were followed by large rebounds as markets were whipsawed by changing investor sentiment and daily newsflow. However, the overriding trend was downwards with equities and commodities being sold off in a flight to safety for US dollars and Japanese yen. In terms of regional equity performance, Japan was the best performing region, falling only 6.4% (in US dollar terms), while Europe performed the worst, falling 22.6% (in US dollar terms). North America fell 14.5%, while Asia ex-Japan declined by 19.7% (in US dollar terms). The fund's regional positioning therefore had a negative impact over the quarter. The underlying funds were the main contributor to this month's relative outperformance. Cantillon Global Equity had a very good quarter and protected capital well during the volatility, finishing the period a full 7% ahead of the MSCI World Index. Veritas Global Fund also enjoyed a good quarter, delivering 3% alpha. The Coronation Global Emerging Market Fund detracted from performance after Emerging Markets were dramatically sold down during September. Indus Select Fund made a positive contribution in Asia, as did Morant Wright and Polar Capital in Japan. In Europe, a great quarter from Egerton was offset by a poor result from Memnon so that the contribution from the European managers was flat. This was repeated in the US where Vulcan Value Partners enjoyed a good quarter as did our recent addition, Harris Concentrated Fund only to be offset by an unusually weak return from Vanguard US Opportunities, which was affected by the sell-off in small cap companies. During the quarter we also added the Harris Associates US Concentrated Fund to the portfolio. Outlook: While fear continues to pervade the markets, it's likely that risk assets will remain out of favour in the short term. Europe is moving closer to a solution for Greece and other member states in financial trouble. The Fed and other central banks are committed to taking any steps necessary to provide market support and a further round of quantitative easing is possible. President Obama has announced a new job creation policy, which is hoped, will stimulate the economy and return it to a sustainable growth level. Despite all the negative newsflow, the fact remains that there are many high quality companies that will continue to grow and emerge from the crisis in an even stronger position than before, regardless of the short-term volatility of the their share prices. These are the companies that we and our managers seek to invest in and we view these levels as an attractive investment opportunity that will deliver attractive returns over the medium term.
|
| |
|
Coronation Global Opp Equity comment - Jun 11
|
|
Tuesday, 6 September 2011
|
Fund Manager Comment
|
The fund returned 0.3% for the quarter, compared to 0.7% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 22.5% is behind that of the benchmark's 31.2%.
The past quarter was dominated by the ongoing debt crisis in Europe, with Greece (again) at the centre. A tense standoff between Germany and the European Central Bank as to the best resolution for the Greek debt problem was compounded by increasing resistance from the Greek electorate towards further 'austerity' cuts demanded by their neighbours, and consequently intense political wrangling by Greek politicians. More concerning however, is the political posturing in the US preventing an increase in the US debt ceiling before 2 August, at which time the government estimates it will run out of funds. The current impasse is so deep that even the ratings agencies have warned that in order to prevent an outlook downgrade on US debt, a resolution needs to be found soon. Furthermore, despite promising data points earlier in the year, recent economic data is signaling a slowdown in the recovery in both the US and wider Europe, while even China's robust growth has eased slightly. These issues all contributed to a choppy market, which recovered strongly in the final week of the quarter on the apparent resolution of this round of Greek funding issues.
In terms of regional equity performance, Europe was the best performing region rising 2.9% (in US dollar terms), while North America performed the worst falling 0.3% (in US dollar terms). Japan was marginally positive at 0.2%, while Asia declined by 0.2%. The fund's regional positioning therefore had a positive, albeit minimal impact over the quarter. Although European markets enjoyed a strong quarter, our managers unfortunately did not and were the main reason for underperformance for the period. Egerton Capital had a very tough quarter despite fairly defensive positioning. Edinburgh Partners Europe also ended the quarter slightly behind the index as did the Memnon Fund which we added in the previous quarter. Morant Japan Fund had a good quarter, beating the Topix Index by a comfortable margin, while Viruvius/Indus Select ended slightly behind their benchmarks for the period. Amongst the global funds, the Coronation Global Emerging Markets Fund performed well and made a positive contribution to relative performance. Contrarius Global Equity was in line with the index but unfortunately Cantillon lagged over the period meaning that our global managers made little contribution to performance. During the quarter, we redeemed from the Veritas Asia and Ruffer European funds. Although Ruffer European has performed very well, the fund is always positioned very defensively. As such, we invested in Intrinsic Value Europe Fund, which invests in high quality companies with a long-term horizon and has also enjoyed stellar returns. To reduce our exposure to Asia, we switched from Veritas Asia into their global long-only fund. This fund also has an impressive long-term track record.
Outlook
Greece's debt issues (and the others in Europe) are resolved for now and in all likelihood the US debt ceiling will be raised before August and avert any major crisis. This will not, however, be the end of it and we would expect the sovereign debt crisis to rumble on for some time. Measures that need to be taken will act as a handbrake on growth and other factors such as credit and commodities will continue to drive volatility in markets. Equity markets continue to provide attractive investment opportunities especially in the larger, multinational companies that offer diversity, growth and high dividend yields. The investment liquidity of such stocks is another attraction to investors and, even if this might at some point be a negative, such times will provide our managers with a buying opportunity.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Mar 11
|
|
Tuesday, 24 May 2011
|
Fund Manager Comment
|
The fund returned 2.2%% for the quarter, against 4.9% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 9.6% is behind that of the benchmark's 14.0%. It has been an eventful quarter, starting with the floods in Australia and ending with the UN military intervention in Libya. Despite the myriad of unsettling events, the world economies seem to be gathering strength, building momentum from a number of positive headline figures. Markets rose strongly into 2011 on the back of improving economic situation but the tragic events in Japan and unfolding political change in North Africa and the Middle East caused a sharp market downturn in mid-March, only to recover by month-end. Energy and food prices have also risen sharply, creating unwelcome inflation pressures. At this time only the ECB seems intent on raising rates in the short term while the US Federal Reserve and the BOE are more concerned about higher interest rates derailing the recovery than transitory inflation that should ease in the months ahead. Indeed, while peripheral Europe remains mired in debt, many believe that the ECB may be about to make a major policy mistake by raising rates too early. In terms of regional equity performance, Japan was the worst performing region, falling 4.9% (in US dollar terms), while Europe performed best, rising 6.6% (in US dollar terms). North America was also strong, finishing up 6.1% while Asia ex-Japan rose 2.8%. The fund's regional positioning detracted from performance over the quarter. The underlying funds mostly detracted from performance over the period. Contrarius Global and Indus Select underperformed due to an overweight exposure to Japan prior to the earthquake and subsequent tsunami. These tragic events and the aftermath have shown how resilient the Japanese are and while there will be supply chain disruptions and a period of economic contraction; the correction was probably overdone and this could be a catalyst to reignite the flailing economy. Morant Wright Japan mostly hold companies with domestic exposure which explains that fund's quarterly underperformance. After a period of strong performance, the European managers underperformed over the past three months after they were caught on the wrong side of a strong rotation into banks and energy stocks during January and February. A recovery in March was not enough to compensate for the earlier underperformance. During the quarter we added a new fund, Memnon European Fund, managed by Laurent Saglio, who has an excellent long-term track record of investing in Europe. Memnon made a promising start by finishing ahead of the market over a comparable performance since its inception. We are not satisfied with the fund's current performance and will be making a number of manager changes during the next few weeks which we look forward to discussing in our next review.
Outlook
We see monetary policy as critical to global economic growth and despite the strengthening in the recovery, we believe it is too early for policy makers to risk raising rates just yet. Although increasing inflation is creating pressure and the various Central Banks are actively discussing doing so, we suspect that that they hope their rhetoric will be enough to tame the current pressures. As budget cuts take effect in the UK and Europe and the US debates their budget requirements, there is potential for unexpected shocks to derail the recovery. We expect this to remain as the foremost concern for policy makers, therefore keeping rates low and an environment distinctly biased towards equities.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Dec 10
|
|
Thursday, 24 February 2011
|
Fund Manager Comment
|
The fund returned 7.6% for the quarter, against 9.1% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 10.1% is behind that of the benchmark's 12.3%.
Equity markets rose strongly in the fourth quarter despite a re-emergence of the sovereign debt crisis in Europe as Ireland was forced to accept a European/IMF bailout and implement further budget cuts. As with Greece, contagion was a concern and Portugal and Spain were forced to strongly deny any need for similar measures. We expect these countries will endure deep recessions but are cognisant that other parts of Europe are showing signs of a slow, steady recovery which should prevent default of any one country. In the US, markets reacted favorably to ongoing improvement in the local economy, overlooking the political 'shellacking' of President Obama and continued weakness in employment numbers. Despite the economic improvement and widespread criticism of the second round of quantitative easing, Fed Chairman Bernanke spoke openly about his willingness to further expand this quantitative easing by launching 'QE3' should it be required. This announcement also buoyed the markets. China, on the other hand, continued to try to moderate its strong economic growth and rampant housing market by raising Bank reserve requirements during the quarter.
In terms of regional equity performance, Japan was the best performing region, rising 12.1% (in US dollar terms), while Europe was the worst performer at only 4.6% (in US dollar terms). North America had a strong month finishing up 11.1% compared to the MSCI World Index return of 9.1%. The fund's regional positioning was the largest detractor from relative performance this quarter.
Overall, the managers only slightly detracted from relative performance, with Asia and the US underperforming and Europe and Japan outperforming their respective benchmarks. In the US, despite an excellent annual return, Vanguard Primecap underperformed this quarter as did Legg Mason Value Fund. UOB Kinetics were marginally behind the index and also had a strong 12-month performance.Veritas Asia had a poor quarter and was the main reason for the Asian underperformance. The manager has been very cautiously positioned in the latter half of the year and has consequently lost ground with the strong momentum in the markets. Vitruvius Asia performed in line with the index.
In Europe, the market stress experienced during the year has created some excellent investment opportunities and Egerton Capital European fund, in particular, capitalised on these to have an excellent performance for the quarter and the year. Although defensively positioned, Ruffer European also contributed to performance this quarter. In Japan, Morant Wright had a good quarter, finishing the year slightly behind the Topix index.
During the quarter, we made an initial investment into Vulcan Value Partners Fund, run by CT Fitzpatrick and his team based in Birmingham, Alabama. Mr. Fitzpatrick was previously a portfolio manager with Southeastern Asset Management before founding Vulcan Value Partners. A strong emphasis on quality companies, detailed proprietary research and a concentrated portfolio are the key strengths we liked about the firm and are pleased to have them manage a part of our portfolio.
We also invested in Indus Select, a Pan-Asia fund. We already have exposure to the manager of this fund through our investment in the Vitruvius Asia Fund. We will ultimately consolidate our investments into the Indus Fund.
Outlook
We have been saying for some time that we believe that equities are under-owned and offer attractive valuations over the medium term. 2010 was a difficult year for stock pickers but we believe that the markets will again focus on company fundamentals as the broader economic environment becomes clearer and more stable. Equities are also an effective inflation hedge which further enhances their attractiveness should, as we expect, inflation start picking up.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Sep 10
|
|
Monday, 8 November 2010
|
Fund Manager Comment
|
The fund returned 12.1% for the quarter, against 13.9% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of 6.1% is behind that of the benchmark's 7.3%. The quarter ended on a very strong note as markets rallied in September on improving economic data and discussions about further quantitative easing. Early in the quarter, however, markets had worries about a double dip recession and the results of the European banking system stress test. Once the Fed and BoE began openly discussing another round of quantitative easing, markets responded positively to such an extent that the further bail-out of the Irish banking system didn't seem to have much impact. Today, Western economies are delicately poised and markets will remain volatile on the newsflow. Asian economies remain strong and indeed China is taking further steps to temper growth, especially in the housing market. In terms of regional equity performance, Asia ex-Japan was the best performing region, rising 22.2% (in US dollar terms), while Japan was the worst performer at only 5.9% (in US dollar terms) in the face of sustained yen strength. European countries mostly had good quarters with the region as a whole returning 19.4%. North America lagged the MSCI World Index returning only 11.7%. The fund's regional positioning was a positive contributor to relative performance for the quarter. Overall, the underlying managers detracted the relative underperformance this quarter. This was primarily as a result of their fairly defensive positioning in July which cost them dearly. Underperformance was common in all regions but our Asian managers, in particular, could not keep pace with the very strong markets. Vitruvius Asian Equity Fund does carry some exposure to Japan which would have held it back. Veritas carried a high cash balance this quarter primarily driven by concerns over China's tightening policies and its broader effect in Asia. The Coronation GEM Fund delivered solid performance over the quarter but, due to defensive positioning, Contrarius lagged the index and contributed slightly to the negative relative performance of the overall portfolio. In Europe, Ruffer lagged the index as would be expected in such strong markets. Although they have been increasing equity exposure of late, they are still cautious. Egerton Europe was slightly behind for the period, slightly detracting from performance.
Outlook
We expect volatility to continue as the global economy slowly recovers in the months ahead. The latest concerns relate to potential currency wars as the crisis nations seek to weaken their currencies against the major trading partners. In this respect, China is the main target but appears to have no intention of revaluing the renminbi and is instead supporting the euro and yen, keeping those currencies strong. Heightening tensions surrounding this issue are of concern but we would hope that the issue is resolved without resorting to protectionism. We have said in the past and continue to believe that the outlook for equities is very positive especially when compared to the expected returns on cash and bonds.
Portfolio manager
Tony Gibson
|
| |
|
Coronation Global Opp Equity comment - Jun 10
|
|
Monday, 6 September 2010
|
Fund Manager Comment
|
The fund returned -10.3% for the quarter, against the benchmark's -12.5% (dividends reinvested). For a rolling 12- month period, the fund's return of 9.5% is behind that of the benchmark's 10.8%.
Markets fell sharply during the second quarter as the sovereign credit crisis continued amid early signs that the global economic recovery has started to lose steam. A trillion dollar bailout agreement between the euro states brought a brief calm to the markets in April but actions taken to cut budget deficits in Europe have raised fears of a double-dip recession. Speculation of a breakup of the euro led to euro weakness during the quarter but eased during June, allowing the currency to rise off its recent lows. Adding to market concerns were the drastic steps taken by the Chinese government to reign in rampant real estate speculation. Oil fell $10 as economic concerns increased and gold rose strongly, briefly reaching a record of $1265 /oz before the end of June.
In terms of regional equity performance, Japan was the best performing region, falling 10.1% (in US dollar terms). North America was next best, falling 11.4%. Given the region's current troubles, Europe was the worst performing region, falling almost 15% on the back of a weakening euro. Asia ex- Japan fell 14.2%. The fund's regional positioning therefore detracted from performance for this quarter.
The underlying managers had a significant impact on the relative outperformance of the past quarter.
Cantillon Global Equity was the biggest contributor falling only 3.4% compared to the MSCI Global Equity Index's decline of 12.5%. Cantillon has a very strict investment strategy of investing in high ROE, low PE stocks and the outperformance, generated mostly in June, was generally across the portfolio rather than any one or two individual stocks. Cantillon remain fully invested at all times.
Veritas Asia fell 8.2% significantly outperforming the market fall of 11.2% (MSCI Pacific ex-Japan in US dollar). The manager, Ezra Sun, has a unique insight into China and this has been key to his excellent long-term performance. However, he has also invested well in other countries and his keen sense of currency movements has led to an effective hedging strategy when required.
Another strong performance came from Egerton European, a new addition to the fund this year, but excellently managed by John Armitage for many years. Egerton European rose 2.1% compared to the fall in European markets of 14.8%. The strong performance was largely generated by his core investments in Safran and Dassault Systems. He lost on Visa during the quarter but had presciently sold down his large position before the passing of a Senate bill in the US that was detrimental to the card networks. The fund also held higher cash balances than normal during and some index put options also assisted in the positive performance.
Ruffer European protected capital well in the drawdown as would be expected given the put option overlay that the manager normally has in place. This became even more important in recent months as he increased his equity exposure from its credit crisis lows to around 75%.
Positive contributions also came from Coronation Global Emerging Market Fund, Morant Wright Japan Fund and Contrarius Global Equity Fund.
Legg Mason Value had a poor quarter and was the biggest detractor from overall performance. Edinburgh Partners Global Fund also marginally underperformed.
During the quarter we redeemed from Comgest Nouvelle Asie and invested in Vitruvius Asian Equity Fund, managed by John Pinkel of Indus. John has many years experience in Asia and Japan and we were impressed with his stock ideas during our meetings with him. In addition to his own analysts, John also has access to the research of other research teams at Indus which is an established hedge fund operation.
Outlook
We continue to see fundamental value in equity markets and our managers speak eloquently on the many companies they invest in that will continue to achieve double-digit growth even with the lower global growth prospects. Despite recent pessimistic newsflow, we believe that corporate earnings will remain robust and may be well ahead of the flat expectations of sell-side analysts. The crisis in Europe is now fully reflected in the market but may generate some volatility in the near term as political and policy issues are dealt with. Another equity market rally may be some time away but in the interim, this is a good environment for the fundamental stock picking managers in this portfolio.
|
| |
|
|
