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

The Strategy¹ delivered a return of 4.45% during the month. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over six months, three, 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)

Strategy Update

Having started the month strongly on the back of positive corporate earnings reports, global equities (in local currency terms) retreated following hawkish comments from the US Federal Reserve and concerns over the new Omicron strain of the COVID-19 virus. Third-quarter earnings growth for the S&P 500 came in at close to 40%, leading to upward revisions to analysts’ full-year forecasts. However, in a testimony to Congress Federal Reserve Chair Jerome Powell dampened investor enthusiasm by stepping back from his previous description of soaring US inflation as ‘transitory’. This sparked fears of an earlier than expected paring back of bond purchases and increases in interest rates. The October inflation number in the US of 6.2% year-on-year only added to these tapering and interest rate fears. The emergence of the latest COVID-19 variant was the other factor weighing on markets towards the end of November. While little is still known about the effectiveness of existing vaccines in combating Omicron, markets remain cautious about its potential impact on economic growth. The Australian dollar was weaker in November, a positive for unhedged portfolios.

The portfolio’s underweight position in Financials was the largest positive contributor to its outperformance in November, followed by the overweight exposure to Information Technology. On the flip side, the overweight position in Health Care and Industrials detracted from relative performance.

Georgia-based retailer, Floor and Decor operates well-merchandised, warehouse-like showrooms with wide selections and consistent stock inventory. Its moat stems from its insourcing model which gives it an immense price and selection advantage. WCM Investment Management (WCM) expects the company to use that advantage to grow its business with professional contractors to boost brand awareness and optimise its omni-channel strategy. This, along with its customer-centric culture, positions Floor and Decor for a long runway of store growth and market share gains.

The recent sharp decline in several high-multiple growth stocks has many investors asking about the outlook for the so-called FAANG (Facebook, Apple, Amazon, Netflix and Google) group of companies. While each of these companies has been owned in WCM Quality Global Growth strategy at some stage, none is a current holding. It would be a mistake to however to conclude that WCM considers these weak companies. The decision to sell a stock is typically for one of two reasons, either the investment team can no longer make the case that the company’s economic moat (competitive advantage) is growing, or a superior opportunity has been identified. Valuation can also be a trigger for portfolio activity, but this is generally more a catalyst for the ‘trimming’ as opposed to outright sale of a position.