US Smaller Companies Equity Fund

Risk Considerations

The Fund is actively managed and invests mainly in a widely diversified portfolio of shares from smaller capitalisation companies in the United States.
Investment in the Fund involves risks, including general investment risk, equity market risk, risks associated with depositary receipts, geographic concentration risk, small and mid-capitalisation shares risk and exclusion criteria risk which may result in loss of a part or the entire amount of your investment.
The Fund may use derivatives for hedging and efficient portfolio management and is subject to derivatives risk. Exposure to derivatives may lead to a risk of significant loss by the Fund.
The value of the Fund can be volatile and could go down substantially.
Investors should not invest in the Fund solely based on this website.

Investment involves risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Overview

Strategy

Fund Summary

Actively managed and invests mainly in a widely diversified portfolio of shares from smaller capitalisation companies in the United States.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Nov-2023 - Curt Organt, Co-Portfolio Manager,

US equities advanced in November, enjoying their best month in over a year as investors welcomed signs of cooling inflation and falling bond yields. At the portfolio level, stock selection in information technology added the most value to relative returns. Shares of a security systems manufacturer advanced as quarterly results came in ahead of consensus due to a record quarter in fire radio sales. A consumer credit information services provider saw its shares appreciate despite mixed quarterly results amid a challenging loan origination backdrop. Our holdings in health care added further value, while stock picks in consumer discretionary also proved beneficial. Conversely, stock selection in industrials and business services detracted the most from relative returns. Shares of a contractor, engineered building, and specialised reliability solutions provider finished in modestly positive territory but trailed sector peers. Strong performance in its engineered buildings solutions segment was offset by weakness across the rest of its business. Energy also detracted due to an overweight allocation and stock selection.

30-Nov-2023 - Curt Organt, Co-Portfolio Manager,

Industrials and business services, information technology, health care, and financials remain the dominating sectors in the portfolio, all with greater than 10% of the equity allocation. During the month, we found opportunities across the various sectors, including energy. Within the sector, we seek selective exposure to high-quality, low-cost producers with attractive acreage for production and the ability to withstand sector headwinds.

30-Sep-2022 - Curt Organt, Co-Portfolio Manager,

We purchased shares of semiconductor capital equipment company Onto Innovation. The company is a beneficiary of the rising cost and complexity of semiconductor manufacturing and occupies a strong position in process control, where it has been gaining market share from major competitors. We believe that the current valuation offers an attractive risk/reward profile even with the prospect of a recession looming.
We added a position in experience management company Qualtrics on share price weakness. We believe the capabilities of the company's analytics engine provide a superior user experience and that the category-defining Qualtrics will remain the dominant player in this niche segment given its first-mover advantage and scale.
We exited Avalara, a company that specializes in cloud-based software that calculates customers' sales tax obligations, and leading mortgage software provider Black Knight following the announcements of their pending acquisitions.
Weaker demand trends and tepid reaction to the company's recently announced acquisition of Sierra Wireless weighed on shares of fabless semiconductor company Semtech. We believe the acquisition pulls forward execution risk as the company transitions to a cloud services business model and exited the position.
IAA provides auction solutions for total loss, damaged, and low-value vehicles and operates in a duopolistic market segment. We believe this to be an attractively valued company in the midst of a turnaround. Improving fundamentals and share gain trends point to long-term performance potential, in our view. We bought shares.
We increased our holding in Stericycle, the largest provider of regulated medical waste disposal. The company is in the midst of a strategic shift, streamlining its portfolio to prioritize the core high-quality medical waste and paper disposal assets while shoring up the balance sheet.
FTI Consulting is a professional services firm that is well known for its bankruptcy and economic consulting practices. Higher demand lifted shares, and we trimmed on strength.
We initiated a position in Steve Madden. The company occupies the top market share position in the U.S. women's fashion footwear market and has the opportunity to expand internationally where it is underpenetrated relative to competitors. We believe the long-term risk/reward potential is favorable at current valuations.
We increased the portfolio's position in Duolingo, an educational mobile app focused on language learning. The company offers a differentiated product that utilizes gaming mechanics to maintain motivation. We believe the company can access multiple growth levers, including the optimization of subscription pricing and the introduction of new product features. Longer term, the potential for category expansion and enterprise partnership provide additional upside.
West Pharmaceutical Services manufactures injectable drug delivery systems and components and provides contract manufacturing services to the pharmaceuticals industry. Shares have languished following lowered full-year guidance for 2022 due to foreign exchange headwinds and a slowdown in COVID-related revenues. We believe the company's risk/reward potential at current valuation is favorable and expect strengthening demand in the company's core business to offset COVID losses longer term. We opportunistically increased our position.
We eliminated Inari Medical, a medical device company focused on developing products to treat blood clots in the venous system, on valuation considerations.

30-Sep-2022 - Curt Organt, Co-Portfolio Manager,

Vulcan Materials is a construction materials producer in the U.S. Shares had been pressured by the suspension of activity at its Mexico quarry. Reset expectations and a focus on a favorable infrastructure spending backdrop in the U.S. may have revived investor sentiment. We maintain a favorable view of Vulcan Materials and its leading position in the attractive aggregates industry.
RPM International manufactures and sells coatings and sealants to consumer and industrial markets. The company's most recent earnings report, released at the end of July, came in modestly short of consensus expectation, but RPM was a relative outperformer within the industry given high raw materials prices. A positive forward outlook was also well received by investors. Toward period close, the company announced a new operational improvement initiative, MAP (Margin Achievement Plan) 2025, which provided an additional lift to shares. We believe the company can grow free cash flow and earnings through a downturn given margin expansion and prudent capital allocation.
Apple Hospitality is a real estate investment trust company that owns a portfolio of upscale hotels concentrated in industry-leading brands Marriott, Hilton, and Hyatt. Shares declined but outperformed the broader sector. Normalizing leisure and business travel trends supported solid quarterly results.
FirstService is a provider of residential real estate services. Shares of the company modestly declined but outperformed the broader sector. The company's in-line results demonstrated solid execution through macroeconomic headwinds that included labor shortages, supply chain disruption, and inflationary pressures. The fallout from Hurricane Ian will likely heighten activity in the company's restoration segment. We have a favorable long-term view of the company given its modest leverage, recurring revenue, and merger and acquisition potential.
Shares of software developer Manhattan Associates surged on impressive quarterly results, demonstrating solid execution in its transition to a software-as-a-service model. We believe the company has a significant runway for growth as its customer base invests in systems upgrades to stay relevant and meet client expectations.
Teleflex is a medical technology company that makes single-use medical devices used for diagnostic and therapeutic procedures in critical care and surgery. Lowered guidance attributed to a slower-than-expected recovery in elective procedures, particularly its UroLift treatment for benign prostatic hypertrophy, has weighed on shares. The company's recent acquisition of Standard Bariatrics, a company known for its innovative stapling device used in gastric sleeve procedures, complements Teleflex's core business. An active merger and acquisition pipeline could further solidify the company's medical device footprint, in our view.
QuidelOrtho, a leading in vitro diagnostics company, was formed by the recent completion of the merger of Quidel and Ortho Clinical Diagnostics. Shares declined as investors scrutinized the first quarterly results for the combined company. Concerns regarding integration challenges, along with questions about the durability of COVID-19 diagnostic names as we enter the recovery phase of the pandemic, likely weighed on sentiment. We have a favorable view of the acquisition and related synergies, along with the company's strong pipeline that has only been enhanced by its COVID-19 diagnostic tests.
Shares of Agiliti, a leading medical equipment rental, maintenance, and management company, pulled back on results that fell short of expectations. We view the current headwinds?a deferral in revenues associated with the government stockpile contract and lower systemic health care utilization?as transitory.
Integration costs and losses from recent divestitures weighed on Cable One. Industrywide headwinds, including rising interest rates, growing competition, and the possibility of increased regulation, also pressured the share price.

Risks

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