Global Equities

BMO Responsible Global Equity Fund - April Update

Nick Henderson offers insights into the performance of BMO’s Responsible Global Equity Fund in April
May 2019
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Risk Disclaimer 

Past performance should not be seen as an indication of future performance. Changes in rates of exchange may also reduce the value of your investment. The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Screening out sectors or companies may result in less diversification and hence more volatility in investment values.

At a glance
  • Stock selection drives outperformance in April
  • Prudential was our top contributor
  • Shimano ‘slipped a gear’ on weaker earnings
  • Geographic asset allocation detracted slightly
  • We reduced US Bancorp and added to other financials with proceeds
Stock selection drives performance

We outperformed our benchmark again in April. This was driven by stock selection, with the overriding factor being continued outperformance of high-quality businesses addressing key sustainability challenges to the world around us. Improved sentiment towards China and general strength in financial stocks saw UK-listed insurance company Prudential lead performance during the month, gaining strongly. Meanwhile, Germany-based technology name SAP saw strong performance on account of a better-than-expected earnings report. Elsewhere, a recovery in profit margins at LED lighting company Acuity Brands saw shares respond well to their earnings report.

In terms of detractors, weaker earnings from Japanese cycle parts manufacturer Shimano meant its shares slipped lower. The healthcare sector came under pressure, with our position in sample and assay technologies specialist QIAGEN feeling the impact of the broader downward trend. A profit warning from EV battery materials provider Umicore sent their shares sharply lower towards the end of April.

Geographic asset allocation was a small drag on performance, whereas the strength in cyclical stocks (relative to their more defensively orientated counterparts) was a positive tailwind for the portfolio.

Risk Disclaimer 

Past performance should not be seen as an indication of future performance. Changes in rates of exchange may also reduce the value of your investment. The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Screening out sectors or companies may result in less diversification and hence more volatility in investment values.

Use our handy glossary to look up any technical jargon you are unfamiliar with.
Adding to favoured financials and review prompts sale

We were active within financials – a sector where we have a modest overweight. Concerns over scope for additional upside given the outlook for interest rates led us to trim back our holding in US Bancorp – a move that allowed us to add to financial names where we have a greater conviction. This included diversified global insurer Allianz, as well as two exchanges, Intercontinental Exchange and Japan Exchange. We also took profits in diversified industrial company Roper Technologies given the tremendous relative outperformance of late which leaves more limited upside.

Broader positioning remains unchanged, with an ongoing bias towards higher quality, sustainable growth companies that can prosper in any near-term economic and policy-driven volatility. We continue to add to positions where we see strong underlying quality and where the market allows us to top-up holdings at more attractive levels. And where appropriate, we have been building positions that offer more defensive revenue streams given the slowdown in economic growth expectations and trimming holdings that have performed strongly and offer reduced upside potential.

Sector-wise, Industrials, Information Technology, Consumer Discretionary and Healthcare are our main overweights, whilst Financials is a modest overweight. The portfolio is underweight Communication Services, Energy and Consumer Staples. At the country level, Japan (keep an eye out for a note on our recent trip to Japan) and the UK are our biggest overweights, with the US our largest underweight.
 

Q1 results provide momentum

Markets maintained upward momentum in April, with a better-than-expected Q1 earnings season picking up the baton from the improving economic data and central bank policy that provided impetus in the first three months of the year. Looking forward, however, we’re mindful that a number of obstacles remain in place and factors such as tensions around global trade, geopolitical tensions and central bank rhetoric mean that volatility looks set to remain a feature, and we remain vigilant. Overall though, we remain relatively constructive, particularly on a medium to long-term view.

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Global Equity

Discrete performance vs. benchmark -12 month rolling (EUR, net of fees)
Percentage growth % Apr-18/ Apr-19 Apr-17/ Apr-18 Apr-16/ Apr-17 Apr-15/ Apr-16 Apr-14/ Apr-15

Responsible Global Equity Fund

16.44

7.24

17.39

-5.28

36.55

MSCI World

14.79

2.04

20.59

-6.25

32.91

Source: BMO Global Asset Management Limited as at 30-Apr-19. Share class I.  Benchmark: MSCI World. The discrete annual performance table refers to 12 month periods, ending at the date shown. Figures subject to rounding.

The Fund is a sub fund of BMO Investments (Lux) I Fund, an investment company of variable capital (ICVC), registered in Luxembourg under No. B 25 570 and authorised by the Commission de Surveillance du Secteur Financier (CSSF). The Prospectus, Key Investor Information Document, Articles of Association, Annual and Interim Reports in German, as well as further information, can be obtained free of charge from our Swiss Representative: Carnegie Fund Services S.A., 11, rue du Général Dufour, CH-1204 Geneva, Switzerland, Web: www.carnegie-fund-services.ch. The paying agent is Banque Cantonale de Genève, 17, quai de l’Ile, CH-1204 Geneva. The current prices can be found at: www.fundinfo.com.

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