Bericht des Fondsmanagements (Stand: 31.10.2018)
Market review Euro area indices suffered in August, with the MSCI Europe loosing -2.25%. At country level Finland, Switzerland and Denmark were the best performers while the UK, Italy and Spain where the main detractors from index performance. The poor Italian performance, on the back of fears on budget negotiations within the government, and additional stress in the financial sector from the Turkish crisis contributed not only to the poor performance of banking stocks but also put pressure on telecoms, materials and utilities. The IT sector was the only winner over the month profiting from the persistent appetite for growth stocks. A return of volatility in emerging currencies caused investors to retreat into safe-haven currencies with the Swiss franc appreciating against the euro. Performance analysis This environment was strongly beneficial to the fund s strategy. The fund posted an attractive outperformance versus the market, totally recovering from the weak performance seen earlier this year. This helped to take YTD outperformance well above 100 basis points. Within our 4Ps framework (profitability, prudence, protection & price) our profitability, prudence (i.e. attractive debt coverage and organic growth) and protection exposures were the main contributors to performance, while price continued to appear out of favour. Most of our good relative performance came from our stock selection mainly in materials, industrials and staples. The underweight on IT and unfavourable selection on discretionary names were the major detractors from performance. At stock level, the biggest contributor to performance was our overweight in UCB, Bayer and Vestas Wind Systems, and the structural underweight in Tobacco companies. The largest negative contributors were the overweights in BBVA and ING. Portfolio activity - overweightings & underweightings Within the 4Ps framework, we continue to focus on the profitability, prudence and price dimensions with reduced exposure to protection while favouring the price dimension. However, given the recent developments in terms of valuations and momentum we reduced the tilt. We therefore continue to prefer companies with strong value characteristics within a universe characterised by earnings quality and resilience. Across sectors we are overweight discretionary, industrials and staples, while we are underweight energy, healthcare, IT and telecoms. Exposures in other sectors of the market are mostly in line with the index. In terms of regions, the fund remains overweight Switzerland,Denmark, Finland and Netherlands while it remains underweight in the UK, France, Italy and Sweden. The fund has a diversified sustainable profile and all exposures are driven by bottom-up stock selection taking into account the 4P Investment framework and the sustainability criteria. Market outlook The end of August has seen a solid manufacturing survey mainly driven by a rebound in developed countries lead by the US. Good figures for the euro area, despite a weaker manufacturing survey, and strong a GDP number in Switzerland, mainly driven by a strong external sector, allow for prudent confidence in the region. Even though economic growth across much of the developed world remains above potential, inflation is kept at low levels so far and the recent China s fiscal and monetary authorities decisions to stimulate the economy, clouds are gathering over the global investment landscape such as the US Federal Reserve becoming more hawkish and the recent US president Donald Trump punishing tariffs on Turkey exporters, that might be extended to Chinese and other European exporters in the coming. In Europe, the Italian political crisis is likely to be the dominant force in fixed-income markets. We can therefore expect some turbulence across financial markets in the coming months which will favour a sustainable prudent approach to equity markets. Portfolio strategy The fund seeks to capture the superior potential of firms that are financially robust and integrate sustainable development into their business models. To achieve this objective, the investment team implements a proprietary model based on financial and extra-financial criteria to identify attractive investment opportunities. Our portfolio companies are characterised by high and stable profitability, healthy balance sheets, attractive valuations and an ability to generate attractive returns without taking undue risk. Portfolio companies also have a lower carbon footprint, fewer controversies and stronger corporate governance.