We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Strategy in June 2020.
The portfolio delivered a return of -0.25% during the month of June, outperforming the benchmark MSCI All Country World Index (ACWI) return of -0.56%. For the year ended 30 June 2020, the portfolio returned 19.65%, well exceeding the benchmark return of 4.75%.
Notes: 1. WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have the same Portfolio Managers and investment team, the same investment objective and use the same philosophy and strategy as the WCM Quality Global Growth Strategy. 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 WCM Quality Global Growth Strategy Composite (the Composite) to provide a better understanding of how the team has managed this strategy over a longer period. 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
Returns include the reinvestment of income. Past performance is not indicative of future results.
The strategy is conveniently available in 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) (LIC).
- WCM Quality Global Growth (Quoted Managed Fund) (ASX:WCMQ) (ETMF).
- WCM Quality Global Growth (Managed Fund) (unlisted managed fund),
- WCM Quality Global Growth (Managed Fund) (hedged).
The strategy outperformed the benchmark MSCI ACWI during June. The long-term performance of the strategy remains strong, with returns exceeding that of the benchmark over previous one, three, six and 12 month periods, as well as over three, five, ten years and since inception.
Although global equity markets were relatively flat during the month, the June quarter saw a very strong rebound from the mid-March lows. In fact, it was the strongest quarter for the US blue-chip S&P 500 Index since 1998. The recovery in global markets, which was initially driven by the larger US technology stocks, has slowly shown signs of broadening into other sectors, regions and risk assets.
European and emerging market equities, which had been relative laggards during the market rebound, were among the better performing regions in June. The prospect of a €750 billion crisis fund and the reopening of borders helped European markets, while emerging markets were assisted by the weaker US dollar. Growth stocks and sectors continued to outperform in June despite the more positive global economic data. This environment typically provides a positive tailwind for value-style investing. The weaker US dollar (stronger Australian dollar) in June was a drag on returns for unhedged global equity portfolios during the month.
‘Value’ versus ‘growth’ is an age-old investment debate. However, the consistent outperformance of large capitalisation growth stocks over the past decade has brought this debate back to the forefront for market participants. Advocates of value-style investing have been warning of an unsustainable disconnect between current market and fair intrinsic value of many of these growth stocks. Growth style investors are often accused of ignoring valuation and being overly focused on long-term thematics and momentum.
The investment team at WCM Investment Management have a clearly defined investment approach which is focused on identifying companies with expanding economic moats (i.e. a rising return on invested capital) and corporate cultures aligned to this moat trajectory. While valuation plays a role in the process, the team does not rely on traditional techniques such as discounted cash flow models to the same extent other investment management firms do. In WCM’s view, these models require an unrealistic level of precision and fail to appreciate the value of companies with growing economic moats.