We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in July 2021.

The Strategy¹ delivered a return of 5.61% during the month. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over three, five and ten 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)

Strategy Update

July was another positive month for global equity markets. The key tailwinds for markets remain accommodative global monetary and fiscal policy, rising vaccination rates and the continued lifting of lockdown restrictions. Longer term interest rates declined further during the month with the US ten-year treasury yields back to levels last seen in February. While declining yields can be a signal of slowing economic growth, markets are currently attributing the decline more to technical, rather than fundamental factors. Growth stocks were a beneficiary of these lower yields, with value sectors such as Financials and Energy lagging. At a regional level emerging markets struggled, held back by the impact of tighter regulation on Chinese technology and private tutoring businesses. The Australian dollar was marginally lower in July, a positive for unhedged portfolios.

The overweight exposure to the growth sectors such as Technology and Healthcare benefited the portfolio in July. At an individual stock level however, some of the larger contributors to performance came from a broad range of sectors including Consumer Discretionary, Financials and Materials. Geographically, portfolio holdings exposed to concerns of increased Chinese regulation were amongst the larger detractors from performance.

Evolution AB, a Sweden-based firm, is an online casino supplier focused on the ‘live’ vertical. Tailwinds are strong, driven by better technology (broadband, lower latency, better streaming technology, and improved cameras and mobile). In addition, regulatory changes towards increased legalisation of iGaming have increased the company’s addressable market. Evolution AB’s moat comes from complex execution, IP, switching costs, and regulatory barriers. That moat is growing as they leverage these strengths to a growing audience.

Rising concern about the impact of increased regulatory risk in the Chinese technology and private learning sectors has become a major topic of debate among market participants. Some investors are now describing China as below investment grade given the rising levels of regulation and government scrutiny. Others are taking a more sanguine view, accepting that regulatory risk has always been a factor to consider when investing in this economy. A structured investment process is key to avoiding the potential risks associated with these two very different responses, namely, a) reacting in a knee-jerk manner or b) complacency.

WCM’s process is anchored on the analysis of moat trajectory. The question WCM will ask is how this news impacts on its prior view on the future direction of the moats (i.e., the competitive advantage) of the companies in which it is invested in. This analysis, not emotion or complacency will determine any portfolio activity.