We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in February 2023.

The Strategy¹ delivered a return of 2.81% during the month, outperforming the benchmark MSCI All Country World Index return of 1.54%. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over one month, 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 find the monthly investment update under ‘More Information’ 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)

Strategy Update

While global equity markets actually retreated over the month, the Australian dollar was significantly weaker against the US Dollar in February, which resulted in enhanced returns for unhedged global equity portfolios. In general, signs of more resilient economic growth promoted a shift in market sentiment regarding the likely peak and then reversal of global interest rates. These signs included stronger than expected US labour market data, European business surveys showing heightened confidence and evidence of a sharp post COVID-19 lockdown rebound in China. The US Federal Reserve, Bank of England and European Central Bank all increased interest rates in February. The commentary from each suggested that while inflation has declined from the peak, central banks believe their job is not done yet. In terms of individual markets, Europe fared best with each of the major continental bourses posting flat-to-positive returns. Emerging markets were the major laggard with narrow performance dispersion at a sector level. Information Technology and Industrials were among the better performing sectors. Quality and growth factors marginally outperformed value.

The portfolio’s outperformance in February can be largely attributed to stock selection. This was particularly evident in the strategy’s holdings in the Consumer Discretionary, Materials and Financial sectors. Security selection in the Information Technology sector was the largest drag on relative performance. From a sector allocation perspective, the zero exposure to Communication Services was the largest positive contributor followed by the overweight positions in Information Technology and Industrials. On the flipside, the above benchmark allocations to Health Care and Consumer Discretionary and underweight position in Consumer Staples detracted from performance.

February was another month in which the market seemed to flip from the hope of a potential ‘pivot’ in the direction of global interest rates to one of fear over ‘higher for longer’. With central banks showing a preference to err on the side of potentially over-tightening monetary policy to ensure inflation is beaten, rather than move too slowly and risk it becoming entrenched, an economic slowdown and/or a recession seems likely. This would inevitably put pressure on global corporate earnings. The WCM Quality Global strategy is not constructed based on any macroeconomic forecasts or expectations. However, its exposure to a diversified range of expanding moat companies with aligned corporate cultures should prove relatively robust in a market where investors are putting a premium on earnings certainty.