Global Focused Growth Equity Fund

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

Manager's Outlook

Since the beginning of 2022, the global investment landscape has absorbed slowing growth, geopolitical risks, tightening monetary policy, elevated inflation, and a significant growth-to-value rotation. During the second quarter, the market accelerated the probability of a market recession and punished any company that missed expectations or was perceived to be at risk from weakening demand or higher input costs. Valuations across broad parts of the market corrected to pre-COVID levels or lower, wiping away all pandemic-level exuberance. The global market began adopting the view of increased importance of capital returns and cash flow-based valuations.

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The Global Focused Growth Equity Strategy began the year positioned for COVID-19 distortions to fade, notably, for supply chain disruptions to correct and U.S. Federal Reserve stimulus to end. This was seen in our active positioning in travel and capital market-related stocks. The conflict in Ukraine catalyzed higher commodity prices and emboldened the Fed to become even more aggressive on the path of hiking interest rates. These actions have eliminated speculative behavior and shifted the market toward pricing in a recession, as seen in current reduced valuations. Because of these actions, the investment landscape has broadened in terms of opportunity set. In our view, valuations are not expensive today, but the volatility of yields will likely continue driving uncertainty of the perceived bottom.

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Today, the portfolio is positioned in many idiosyncratic names across a variety of sectors that have already priced in a shallow recession in cyclical, defensive, and secular growth companies. The portfolio is taking advantage of the opportunities where we believe we have insights about improving future economic returns that we don't think are reflected in valuations. We appreciate that the market is now evaluating the risk to future earnings; however, we estimate that inflation is peaking, which could be the key for returns of our existing stock decisions. The last six months have humbled investors but has also created a real opportunity for active managers.

Strategy

Fund Summary

Actively managed and invests mainly in a diversified portfolio of shares of companies that have the potential for above average and sustainable rates of earnings growth. The companies may be anywhere in the world, including emerging markets.

OUR VIEWS ON GLOBAL EQUITIES

Performance - Net of Fees

Past performance is not a reliable indicator of future performance. Performance returns are calculated on a NAV-NAV basis, net of fees, with distributions reinvested. Returns for the current year performance is cumulative. Benchmark returns are shown with reinvestment of dividends after the deduction of withholding taxes. The Excess Returns are shown as Fund % minus the Benchmark %. Performance returns for share classes less than 1 year old (and associated benchmarks) are cumulative rather than annualised.

30-Nov-2023 - David Eiswert, Portfolio Manager,

Global equities advanced in November amid hopes that major central banks may not have to raise interest rates further to combat inflation. Within the portfolio, our holdings in the information technology sector, coupled with an overweight position, contributed the most to relative returns. Shares of an e-commerce omnichannel platform surged following the release of stronger-than-expected third-quarter earnings and fourth-quarter revenue guidance. Management noted that third-quarter gross merchandise value strength was primarily driven by merchant growth across the platform. We think the company is well positioned for accelerating returns given the fact that its strategic positioning as the digital operating system for smaller merchants has only strengthened over the last couple years, and recent plans for increased monetisation are encouraging. Conversely, stock picks and an overweight position in energy detracted. Shares of a large oil field services company declined as falling oil prices pressured energy names. We believe the company is the technology leader in its field with the greatest scale and best reputation with customers. In our view, the firm is also well positioned to benefit from increased international spending that we expect to occur both onshore and offshore and across commodities.

30-Nov-2023 - David Eiswert, Portfolio Manager,

We are underweight industrials and business services given the growing possibility of a global economic slowdown, which generally pressures demand in industrial end markets. However, we still believe our exposure within the sector is poised to capture the tailwinds of accelerating economic fundamentals as COVID-19 distortions continue to abate and the world begins to normalise in a more synchronised fashion. Our exposure is focused on long-cycle industrials and commercial services companies that have strong competitive positions, as well as aerospace-related names that have a significant backlog and pent-up demand.

30-Jun-2022 - David J. Eiswert, Portfolio Manager,

We sold shares of athletic sportswear brand Nike. While we continue to believe the company is a high-quality growth opportunity, we think the outlook for the firm's business in China is more unpredictable going forward, so we chose to exit our position in favor of names where we have higher conviction.
We sold shares of online travel agency Expedia to manage our position size. We think Expedia stands to benefit from pent-up travel demand as the pandemic wanes. We also believe that the market underappreciates the company's in-house vacation rental business, Vrbo, which has been resilient during the pandemic and stands to benefit further from normalization in travel. Further, Expedia's ongoing overhaul of its cost structure should boost profitability on the other side of the pandemic.
We sold shares of GE to manage our position size. We continue to think fundamentals, particularly free cash flow, are troughing, and we believe the firm's core businesses in aviation, health care, and renewables are well positioned for a better-than-expected recovery over the next few years, which should drive accelerating returns.
We bought shares in U.S. domestic airline Southwest Airlines. We think Southwest's high-quality network and organization, balance sheet strength, and strong industry position should help drive accelerating growth and return on capital as travel demand normalizes.
We bought shares of global oil and gas exploration and production firm Hess, which has valuable assets in the Bakken formation, Guyana, the Gulf of Mexico, and Asia. We like Hess's diverse asset base and highly competitive oil price breakeven, and we think Hess is well positioned for free cash flow growth acceleration as additional production capacity comes online, particularly in Guyana.
We bought shares of software-as-a-service sales platform Salesforce. We think Salesforce is an outstanding business, with strong leadership in its customer relationship management platform and ecosystem capabilities. The company boasts a highly recurring revenue subscription business model, and we think its quality and growth runway are underappreciated by the market. Over the near term, we think the firm is well positioned for accelerating returns as margins improve and the business continues to grow. In our view, the stock has been oversold amid broader negative sentiment in technology names, which created an attractive entry point.
We purchased shares of MasterCard on weakness. We continue to like MasterCard's focus on technology and planned expansion into China and believe the company is well positioned for strong growth once the world learns to live with COVID-19 and cross-border travel resumes.

30-Jun-2022 - David J. Eiswert, Portfolio Manager,

Shares of Brazilian ominichannel retailer Magazine Luiza sank on disappointing earnings results, broader macro pressure in the Brazilian market, and generally bearish sentiment for consumer growth names and concerns about higher inflation's effects on retailers. While positive physical store sales and faster-than-anticipated normalization in gross profit margins surprised to the upside, these positive data points were overshadowed by higher financial expenses and �"soft e-commerce" results. We continue to think Magazine Luiza has a best-in-class management team and is a strong, durable grower capable of sustaining well above industry average growth in e-commerce and marketplace retail.
GE is a global multi-industrial conglomerate currently in the process of a long-term corporate restructuring. Despite releasing quarterly earnings that exceeded consensus expectations, shares slumped as management indicated that upcoming performance would fall closer to the low end of the guidance range due to the negative effects of ongoing pandemic headwinds, geopolitical strife, inflationary pressures, and supply chain�constraints. We believe the firm's core businesses in aviation, health care, and renewables are well positioned for a better-than-expected recovery over the next few years, which should drive accelerating returns.
Shares of leading discount broker Charles Schwab fell after the company reported quarterly earnings in April that fell short of estimates due to�a disappointing topline miss driven by lower asset management fees and trading revenues. The stock was also pressured by concerns that deposits moving into higher-earning vehicles could impact balance sheet growth. Growth trends continued to be strong, however, and we like Charles Schwab for its diverse business model compared with other discount brokers, its top-notch management, its history of strong capital allocation, and its leverage to rising interest rates. We also think the company is benefiting from capturing the synergies from its 2020 acquisition of TD Ameritrade.
Shares of U.S. wireless carrier T-Mobile rose as investors remained encouraged by the company's 5G midband spectrum deployment, which is ahead of competitors, as well as the firm's progress on decommissioning Sprint's network. This reinforces our view that T-Mobile is well positioned for accelerating revenue and free cash flow growth. We continue to believe that T-Mobile has the potential to become the best wireless carrier in the U.S. as it realizes synergies from the Sprint merger, increases its exposure to suburban and rural areas as well as the enterprise wireless market segment, and further expands its 5G network leadership.

Risks

Typical Investor