We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in June 2022.
The Strategy1 delivered a return of -2.72% during the month. 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 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)
After a brief respite in May, global equity markets continued their decline in June, bringing to a close the worst opening-half year for developed market equities in over 50 years. Persistently high inflation, rising interest rates and worrying signs of an imminent slowdown in economic growth remain the primary concern for investors. As monetary conditions have tightened, consumer confidence and other leading indicators of future economic activity have fallen sharply. This combination of higher interest rates putting pressure on price to earnings multiples of growth stocks and recession risks negatively impacting the more cyclical areas of market, meant there was no hiding place in June.
All major sectors of the equity market posted negative returns for the month, including Energy which is now the only sector in positive territory year-to-date. Further easing of China’s COVID-19 lockdown measures was one of the few good news stories for markets during the month. This led to a 7% increase in the Chinese equity market, which was a major contributor to outperformance in emerging markets relative to developed markets over the month and year-to-date. In terms of style factors, growth beat value for the first time in 2022. The Australian dollar was lower in June, partially offsetting the impact of falling markets on unhedged portfolios.
Sector allocation was the major contributor to the Strategy outperformance in June, led by the overweight allocation to Health Care and the underweight positions in Energy (zero exposure) and Materials. The major detractors were the overweight exposure to Information Technology and the underweight position in the Communication Services sector. In terms of stock selection, Information Technology and Financials were the major positives.
While the first half of the year has been very challenging for markets and many risks remain, the news is not all bad. The sharp decline in markets has reduced valuations significantly. The price to earnings multiple for the Strategy is down from more than 40 times at calendar year end to around 25 times. The market weakness has also provided attractive entry points for new additions to the portfolio. These new additions included technology firms such as Snowflake, Bill.com, Microsoft and Datadog, and railroad firms Union Pacific and Canadian Pacific.
Looking forward, the investment team remains confident that over the long term, being disciplined and choosing only the highest-quality companies that have expanding competitive advantages supported by well-aligned cultures is the best strategy to generate excess returns.
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.