We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in October 2022.
The Strategy1 delivered a return of 6.04% during the month, compared with the benchmark MSCI All Country World Index return of 6.64%. The Strategy has delivered returns in excess of the benchmark MSCI All Country World Index over 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)
After a somewhat shaky start, global equity markets subsequently recovered to post a very positive return for the month. The US and European markets fared best, while emerging markets, weighed down by Chinese equities, fell by close to 3%. The closely watched inflation and labour market data released during the month continued to put pressure on central banks to increase interest rates. The European Central Bank was the latest to react to this data, increasing its benchmark rate by 75 basis points.
It was also another big month in global politics. In China, the Chinese Communist Party confirmed the election of President Xi Jingping for an unprecedented third term. The UK completed its market calming change of Prime Minister and reversal of its September mini budget. At the corporate level, October saw the start of the quarterly earnings reporting season. At the midpoint, aggregate reported quarterly earnings have been in line with expectations.
For individual sector performance, Energy was again the standout over the month, followed by Industrials and Health Care. Factor performance varied across regions. Value performed strongly in the US and Europe but was more mixed in Japan and emerging markets. Quality performed strongly in Europe but less well in other regions.
Portfolio attribution analysis for the month showed a positive contribution from sector selection with the primary drivers being the zero allocation to Communication Services and overweight exposures to Health Care and Industrials. Sector allocations detracting from relative portfolio performance included the underweight positions in Energy (no exposure) and Financials and the overweighting to Consumer Discretionary. Stock selection in October was strongest in the Consumer Discretionary and Financials sleeves of the portfolio. Conversely, selection in the Health Care, Information Technology and Industrial sectors was a drag on performance.
Market participants continue to wrestle with the question of whether central banks can get the balance right in terms of reining in inflation without triggering a deep economic downturn. Notwithstanding the much better performance of markets in October, the more pessimistic narrative has certainly been the more dominant one in the year to date. With market sentiment indicators remaining ‘bearish’, this is unlikely to change materially in the short term. However, as WCM has recently been reminding clients, now is the time to pay attention to the Warren Buffet adage, ‘when investing, pessimism is your friend, euphoria the enemy’. In line with this, the investment team remains focused on finding companies continuing to play ‘offence’ in this difficult environment by reinvesting in their businesses to strengthen and expand their moats.
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.