Monthly in focus - BMO SDG Engagement Global Equity Fund

September 2019

Jamie Jenkins

Managing Director and Co-Head of Global Equities

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Risk Disclaimer 

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.

Jamie Jenkins offers insights into BMO SDG Engagement Global Equity Fund in August and discusses recent activity and portfolio positioning.

While interest rate sensitivity was the key factor, good results still drives stock performance

Japanese medical supply business, Hoya Corp, continued to benefit from strong results at the end of July, whilst US insurer, Alleghany Corp, gained following strong results at the start of the month. Food distribution service business, Americold Realty Trust, was a beneficiary of the falling US interest rate expectations during August. On the negative side, concerns about slowing industrial end markets hit shares of medical supplies business, Mettler-Toledo, whilst bank holding group, SVB Financial, fell as falling rates expectations hamper its returns. Shares in Singapore based transit operator, ComfortDelGro, fell amidst slightly lacklustre quarterly results that led to some full-year estimates being taken lower. Sector performance was driven by interest rate sensitivity and perceived defensive attributes in the face of increased economic uncertainty. We missed out by being underweight in the real estate sector, but benefited from our overweight to consumer staples and our zero weighting in energy stocks.

At a glance
  • Trade winds and recession fears weigh on investor confidence
  • Stocks seen as defensive prospered – which was neutral for our mix of quality companies with sustainable growth.
  • Falling interest rate expectations was negative for some positions in financials, especially SVB Financial
  • Good results are still driving stock performance
  • Buying Kontoor Brands, a US-based apparel manufacturer, funded by sale of Amdocs
  • The fund was launched in March 2019, so we do not have twelve months of performance figures, therefore we are restricted from commenting on performance.

Risk Disclaimer 

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.
Buying Kontoor Brands, a US-based apparel designer, funded by sale of Amdocs

We introduced US-based apparel designer, Kontoor Brands, where we see a combination of brand strength, attractive valuation, and scope for material engagement activity. This purchase was funded by the sale of our holding in IT services business, Amdocs, where we have some concerns about the visibility into its end markets.

Our portfolio positioning retains its tilt towards mid-sized companies where there is a clear opportunity for engagement over sustainable development goals. We will be looking to continue with our strategy of adding to positions where we see underlying quality, the potential to engage with the company and where the market allows us to add at more attractive levels.

Our main overweight sectors are healthcare, consumer staples and financials. These are funded by underweight positions in real estate, communication services and energy. From a geographical perspective, we are overweight to Europe and Asia ex-Japan. This is funded by being underweight to North America.

 

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Global Equity

Trade winds and recession fears hold back equities despite fundamental attractions

August saw equities give up a little bit of their recent strong performance and large cap outperforming small and mid-cap over the month again. There were further US tariffs on China and retaliation from Beijing, as well as rising geopolitical risks. Meanwhile the bond yield curve inversion highlighted fears from the ongoing weaker trend in global economic data. These factors are likely to remain at the forefront of investors’ minds for the rest of 2019. Against this backdrop, whilst we continue to be vigilant – a combination of valuation levels and uncertainty over the strength of corporate earnings in the second half of the year being our main concerns – we do remain constructive towards global equities and see scope for further gains in 2019.

Related capability

Global Equity

Our portfolio positioning retains its tilt towards mid-sized companies where there is a clear opportunity for engagement over sustainable development goals.

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