Global Equities

BMO Responsible Global Equity Fund - March Update

Jamie Jenkins offers insights into the performance of BMO’s Responsible Global Equity Fund in March
April 2019

Jamie Jenkins

Managing Director and Co-Head of Global Equities

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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
  • Outperformance in March was driven by stock selection
  • Country and sector allocation were small negatives
  • Accenture was our top contributor
  • SVB Financial Group was the largest detractor
Stock selection drives performance

 
We outperformed our benchmark in March with stock selection the key driver, where a number of holdings continue to demonstrate robust earnings growth and exposure to underlying sustainability structural growth. The positive stock selection was partially offset by both country and sector allocation which were small negatives; underweight to Consumer Staples and overweight to Industrials were mild negatives, partially offset by the positive contribution from the overweight to Information Technology (IT). IT was also an area of decent stock selection, with Accenture rallying on strong results, whilst Keyence and Mastercard also benefitted from a more positive investor sentiment given strong underlying growth. Elsewhere, telecom infrastructure business Crown Castle was a beneficiary of the market’s search for yield following the dovish Fed comments, whilst a rebound in Indian equities benefited Indian private bank HDFC.

Partially offsetting this strength, the shift in the Fed’s monetary stance and ECB’s new plans for a stimulus package, in light of lowered economic growth expectations, saw meaningful weakness in developed market financial stocks. This explained the weakness in our holdings in SVB Financial, ING Groep, Prudential and US Bancorp.

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 on weakness, locking in gains

 
Our focus remains a long-term one with turnover typically relatively low.  There was some activity however as we continued to use the share price weakness in US managed care business Humana to add to the position. In terms of sales, we completed our sale of Daiseki, a Japanese waste treatment and recycling specialist on worries over the business’s quality and stock liquidity. We also took advantage of the strength in the share price in Japanese automation business, Keyence, to trim holdings as the share price rally – in our view – left more limited upside to our fair value.

In terms of overall positioning, we retain our 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.

Whilst there are periods of short-term underperformance, we remain of the view that higher-quality companies should outperform over the long term due to their robust cash flow, focus on improving total shareholder returns and increasing franchise value.
 

Recession fears misplaced?  We think so

 
Although a number of obstacles to market performance remain in place, our general view remains that talk of a recession this year is misplaced. We believe the key risks continue to be global trade issues, uncertainties around Chinese growth prospects and geopolitical tensions. Meanwhile, central bank actions, as witnessed by the change to Fed policy in the US, could lead to short-term challenges. That said, macro-economic conditions remain fairly balanced, and with profit expectations reduced and valuations back at more attractive levels, we still feel that there is a positive outlook over the medium term for equity markets. We remain vigilant but stay constructive overall.

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Global Equity

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

Responsible Global Equity Fund

14.5

4.1

19.4

-8.8

38.5

MSCI World

13.9

-1.2

22.3

-9.0

36.1

Source: BMO Global Asset Management Limited as at 31-Mar-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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Global Equity

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