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)

Strategy Update

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.