We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy (the Strategy) in August 2022.

The Strategy¹ delivered a return of -2.11% during the month, outperforming the benchmark MSCI All Country World Index (ex-Australia) return of -3.54%. 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

Following a brief respite in July, the declines in the following two months meant the September 2022 quarter was the third consecutive negative quarter of the calendar year for global equity markets. Stubbornly high inflation and central banks’ commitment to fighting it through higher interest rates remain the primary short-term headwinds for both equity and bond markets. On a more medium-term basis, investors are concerned these higher rates may lead to recessionary economic conditions and ultimately a negative impact on corporate earnings. The unfunded, expansionary mini budget announced by the new Truss government in the UK and the subsequent response from the Bank of England to limit the rise in Gilt yields added to the negative market sentiment.

The September market sell off was wide ranging with all major markets and sectors recording monthly declines. At a factor level there was no clear pattern with the performance of value, quality and growth differing across regions. The one clear trend was the outperformance of lower volatility stocks. The strong performance of the US dollar was another feature of the month. This helped reduce the decline in unhedged global portfolios.

Portfolio attribution analysis shows that most of the outperformance in September was due to sector selection. The positively contributing sector positions included the overweight allocation to Health Care and zero exposure to Communication Services and Real Estate. In contrast, the overweight allocation to Information Technology and Industrials detracted from returns as did the underweight to Consumer Staples. In terms of stock selection, the major positive was the consumer discretionary sleeve with holdings in the Health Care and Information Technology sectors a drag on relative performance.

The investment team at WCM always strives to learn from market experiences. One such learning from the recent market downturn and style shift from growth to value was the high correlation observed amongst the holdings in the defensive growth sleeve of the Quality Global Growth portfolio. From this, the team recognised the need to have greater diversification amongst the defensive growth holdings in terms of their key business drivers and industry tailwinds, while also meeting WCM’s core requirements of an expanding economic moat with aligned corporate culture. As such, several new and diverse defensive growth names have been added to the portfolio including North American waste services company, Waste Connections, and pharmaceutical distribution firm, McKesson Corporation.