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

The Strategy¹ delivered a return of 2.47% during the month, compared with the benchmark MSCI All Country World Index return of 1.18%. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over one month, one, 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

Global equity markets declined marginally (in local currency terms) in May conceding some of the solid gains made year to date. The dominant headline making news for financial markets for most of the month was the US debt ceiling impasse between the Republicans and the Democrats. However, by month end, a compromise was reached which required Congress approval. Economic data in the US and Europe remained mixed with the manufacturing (weak) and services (strong) sector surveys giving conflicting signals in terms of the outlook for growth. The pace of China’s post lockdown recovery showed signs of slowing while in contrast, Japan posted a positive quarter 1, with GDP growth driven by strong domestic demand. Monetary tightening from central banks continued with the US Federal Reserve, the Bank of England and the European Central Bank each raising interest rates by 0.25%.

At a regional level, developed market equities outperformed emerging markets. However, the main divergence within markets was at the sector level. Technology stocks, in particular those considered beneficiaries of the surge in artificial intelligence (AI), made strong gains while Energy and Materials were among the weaker performers. Factor performance during the month reflected this strength in Technology stocks with growth outperforming value. The Australian dollar was weaker in May, enhancing the returns of unhedged global portfolios.

The portfolio’s outperformance during May was largely attributed to stock selection. The sectors most contributing to this were Information Technology, Financials and Consumer Staples. On the flipside, security selection in the Consumer Discretionary, Health Care and Materials sectors detracted from relative performance. In terms of sector allocations, the largest positive contributors included the zero exposure to both Energy and Utilities. The overweight exposure to Health Care and below benchmark position in Information Technology and Communication Services were the primary detractors.

The hype around AI has many investors scrambling over how best to gain exposure to it. Having conducted a detailed research project on AI, the investment team at WCM concluded that adopting a ‘picks and shovel’ approach is the best way to invest in this theme. This approach involves investing in companies that will be providing key inputs into AI as opposed to making binary bets on individual winners. Examples of holdings in the portfolio that stand to benefit from the growth in AI include Microsoft, Entegris, Snowflake and Lam Research.