We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in December 2022.
The Strategy1 delivered a return of -5.96% during the month, compared with the benchmark MSCI All Country World Index return of -5.09%. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over five and 10 years, and since inception.
Notes: 1. WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have the same Portfolio Managers and investment team, the same investment principles, philosophy, strategy and execution of approach as those used for the WCM Quality Global Growth Strategy however, it should be noted that due to certain factors including, but not limited to, differences in cash flows, management and performance fees, expenses, performance calculation methods, and portfolio sizes and composition, there may be variances between the investment returns demonstrated by each of these portfolios and the WCM Quality Global Growth Strategy Composite (the Composite) in the future. As WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have only been in operation for a relatively short period of time, this table makes reference to the Composite to provide a better understanding of how the team has managed this strategy over a longer period. Performance is net of fees and includes the reinvestment of dividends and income. 2. Composite inception date is 31 March 2008. 3. Benchmark refers to the MSCI All Country World Index (with gross dividends reinvested reported in Australian Dollars and unhedged). 4. Value Added equals Composite Performance minus Benchmark performance. 5. Annualised.
The Strategy is conveniently available via four investment structures to accommodate the differing preferences of individual investors. You can read the full investment update for each of these products on the links below:
- WCM Global Growth Limited (ASX:WQG)
- WCM Quality Global Growth Fund (Quoted Managed Fund) (ASX:WCMQ)
- WCM Quality Global Growth Fund (Managed Fund) (Unhedged)
- WCM Quality Global Growth Fund (Managed Fund) (Hedged)
Global equity markets declined sharply in December 2022, bringing to a close the worst calendar year of returns for the MSCI All Country World Index benchmark since 2008. Once again it was the familiar themes of inflation, interest rates, recession fears and the war in Ukraine which weighed on markets. While inflation is showing tentative signs of having peaked, it remains significantly above global central banks’ tolerance levels. Market expectations therefore are for further interest rate rises into the first quarter of 2023. The most significant ‘new’ news in December was the decision of the Bank of Japan to ease yield curve controls and the additional relaxation of China’s zero COVID-19 policies. In terms of regions, Asia recorded a positive return and was the best performer for the month, with the US being one of the weakest.
Performance dispersion at a sector level was relatively narrow. Utilities and Financials were two of the better performers and Technology lagged. At a factor level, it was another strong month for value relative to growth. Portfolio underperformance in December was largely attributed to stock selection. While stock selection was a positive contributor in the Health Care and Information Technology sectors, it was offset by holdings in the Financials, Industrials and Consumer Staples sleeves of the portfolio. In terms of sector selection, the largest positive contributions came from the overweight exposures to Health Care and Industrials and zero exposure to Communication Services. Sector exposures detracting from performance included the underweight position in Consumer Staples and Utilities and above benchmark exposure to Information Technology.
The 2022 bear market for equities was driven by the compression of valuation multiples due to sharply rising bond yields. This environment has been particularly challenging for WCM’s Quality Global Growth Equity Strategy given its bias to companies with investment theses based on longer duration investment timeframes. One of the core values of WCM’s investment team is ‘continuous learning’. This means that while it would be easy to blame recent portfolio underperformance solely on these ‘style’ headwinds, the investment team also recognises mistakes they have made and the lessons to be learned from them. In terms of outlook, the consensus view from market commentators is for a slowdown in economic growth as central banks remain firmly focused on bringing down inflation. Trying to forecast the timing and scale of this slowdown is a near impossible task. However, when it does occur the market’s attention will likely move more towards the sustainability of corporate earnings. This will provide a more positive backdrop for the portfolio given its exposure to high quality (i.e., expanding economic moat) companies now trading at relatively low valuations.
DISCLAIMER: AGP Investment Management Limited (AGP IM) (ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Associate Global Partners Limited (AGP) (ABN 56 080 277 998), a financial institution listed on the ASX (APL). AGP IM has prepared this material for general information purposes only for WCM Global Growth Limited, a listed investment company (ASX: WQG).
AGP IM is the responsible entity for WCM Quality Global Growth Fund (Quoted Managed Fund) (ARSN 625 955 240) (ASX: WCMQ) and WCM Quality Global Growth Fund (Managed Fund) (ARSN 630 062 047).
AGP International Management Pty Ltd (AIML) (ABN 33 617 319 123) is the investment manager for WQG and is an authorised representative of AGP IM. WCM Investment Management, LLC (WCM) is the underlying manager and applies its WCM Quality Global Growth Equity Strategy (the Strategy), excluding Australia, in managing each of WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund)(the Funds). WCM does not hold an AFSL. WQG and CIML are part of the AGP Group.
Any references to ‘We’, ‘Our’, ‘Us’, or the ‘Team’ used in the context of the portfolio commentary, is in reference to WCM Investment Management, as investment manager for the Strategy or CIML as investment manager for WQG.
Even though the Strategy, excluding Australia, is applied to each of WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) certain factors including, but not limited to, differences in cash flows, fees, expenses, performance calculation methods, portfolio sizes and composition may result in variances between the investment returns for each portfolio. The performance of the Strategy is not the performance of the portfolios and is not an indication of how WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) would have performed in the past or will perform in the future.
The material should not be viewed as a solicitation or offer of advice or services by WCM, AGP or AGP IM. It does not contain investment recommendations nor provide investment advice. It does not take into account the objectives, financial situation or needs of any particular individual. Investors should, before acting on this material, consider the appropriateness of the material.
Neither AGP IM, AGP, their related bodies corporate, entities, directors or officers guarantees the performance of, or the timing or amount of repayment of capital or income invested in the Funds or that the Funds will achieve its investment objectives. Past performance is not indicative of future performance.
Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided that the positions will remain within the portfolio of the funds. Any securities identified and described are for illustrative purposes only and do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.
Investors should seek professional investment, financial or other advice to assist the investor determine the individual tolerance to risk and needs to attain a particular return on investment. In no way should the investor rely on information contained in this material.
Investors should read the Product Disclosure Statements (PDS) of the Funds or any relevant offer document in full before making a decision to invest in these products.