The data shown is not constant over time and the allocation may change in the future. Totals may not sum to 100.0% due to rounding. All data source Allianz Global Investors unless otherwise stated.
Data as of 30.09.2020
Data as of 30.09.2020. Excludes Cash
|Europe ex UK||27.6|
|Pacific ex Japan||5.2|
Data as of 30.09.2020. Excludes Cash
After recording the strongest August returns since 1986, global equities weakened in September with the MSCI All Countries World Index registering its first monthly decline since March’s steep sell-off. Disappointment over the lack of new US fiscal support weighed on sentiment, as did concerns that a surge in COVID-19 cases in Europe would curtail the region’s economic recovery. By contrast, China’s recovery appeared to pick up speed, despite a moderate appreciation of the US dollar. In a change from recent months, US equities recorded some of the weakest returns, including a dip for the popular technology stocks. Oil prices fell and gold also eased from the record highs it reached in August.
The Trust’s portfolio outperformed its benchmark over the month with stock selection in Technology and Consumer Services boosting returns. However, the Trust’s NAV fell slightly more than the weakening market, with a return of -0.95% vs. the -0.31% return from the benchmark.
The Cooper Companies made the largest positive contribution to performance. The maker of contact lenses and surgical instruments reported Q3 results which beat expectations. This was matched by robust guidance, reflecting Cooper’s ability to mitigate the effects of the pandemic and resurgent demand for its Silicon Hydrogel lenses.
Bright Horizons has continued its strong run since releasing results in August. Working from home has only highlighted the importance of reliable childcare, while any COVID-related concerns are increasingly offset by evidence children are less likely to transmit the virus. We also share the view that any impact from families leaving urban centres in favour of the countryside will be more than offset given the scale of unmet demand.
Munich Re made the largest dent to performance, falling in tandem with a broader sell in off in European financials. The company has been impacted by this year’s hurricane season but over time may recover from this with improved pricing, as has happened in past insurance cycles. Munich Re’s business model is relatively defensive with a steady long-term growth profile.
Ashmore also detracted from returns. The emerging markets focused asset manager has faced two recent quarters of underperformance and outflows. This is not unusual in times of volatility given the company’s somewhat contrarian investment approach. Ashmore is one of the longest standing practitioners in the asset class with a strong track record and a resilient, internally developed and entrepreneurial culture. We expect investors will return to emerging markets. In the meantime, a bullet proof balance sheet and an attractive dividend yield means we are paid to wait.
During the first phase of the pandemic, stock markets were grappling with the effects of containment policies that caused a major economic contraction, offset to some degree by a huge monetary and fiscal stimulus. This period saw a major outperformance of the “stay at home” stocks, in sectors such as technology, healthcare and other non-cyclical industries. As we head into the winter and autumn months, the big question is “will this trend continue or could there be a major reversal?”
One major change is that most economies are no longer contracting. For sure, gross domestic product (GDP) is still way down on 2019, but in most countries the recovery has begun, as economies have opened up again. At the same time, a second wave of infections has taken hold across Europe and parts of the US, although hospitalisations and deaths remain well below the peak levels earlier in the year. Debate rages as to the reasons behind this. Most Governments appear to be treading cautiously for now, bringing back restrictions where they think it is necessary to do so. In the short term, this is likely to put the brakes on the nascent recovery in business and economic activity. That said, we now know a lot more about the virus and how it spreads. Treatments have improved and there are several vaccines in advanced trials. There are also signs that consumers and businesses are learning to adapt and live with the virus.
Just as this downturn was unlike any other, the recovery is also likely to be unusual. Certain cyclical industries, such as those related to housing, are already recovering quite rapidly, driven by pent up demand, shifts in consumer preferences and switching of spending from other areas like travel and leisure. Several management meetings in recent weeks have confirmed to us that this is happening. On the other hand, other industries such as travel and leisure, remain deeply depressed and will continue to struggle as long as COVID restrictions remain in place. Permanent behavioural change may also suppress the recovery in some areas, such as business travel and certain parts of leisure. Indeed, a number of the changes to the Trust’s portfolio in recent weeks and months reflect these considerations.
The Trust’s portfolio has always sought to maintain a balanced exposure, investing in high quality companies across a range of sectors both defensive and cyclical. This is especially pertinent today. In the face of a highly uncertain and volatile market environment, our balanced approach ensures that stock picking remains the primary driver of long-term returns.
Just as this downturn was unlike any other, the recovery is also likely to be unusual
This is no recommendation or solicitation to buy or sell any particular security.
|NAV (debt at fair value)||1.0||20.7||0.1||16.5||75.5|
Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 30.09.2020.1
|NAV (debt at fair value)||0.1||6.1||9.7||19.1||26.6|
Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 30.09.2020.1
1Past performance is not a reliable indicator of future returns. You should not make any assumptions on the future on the basis of performance information. The value of an investment and the income from it can fall as well as rise as a result of market fluctuations and you may not get back the amount originally invested.This investment trust charges 70% of its annual management fee to the capital account and 30% to revenue. This could lead to a higher level of income but capital growth will be constrained as a result.
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