10/7/2021 11:00:00 PM

Fund Reviews: Global Growth

Written by Guy Thornewill, Head of Research UK & Europe and Senior Investment Analyst

Global Growth Fund 

The Global Growth Fund returned 0.4% for the month, bringing it to a 12-month return of 29.1%.
We view this monthly performance as respectable given that markets were lower in September, and indeed fell quite sharply in the second half of the month. In last month’s report, we highlighted the risks to corporate earnings from clogged up global supply chains, and this is primarily what caused the market weakness.  Growth stocks also took a hit as bond yields rose in the US. Unfortunately, the supply chain and cost issues that many companies are experiencing look set to last for some months yet, even if Delta-variant induced factory and port closures in Asia are beginning to ease. Our strategy has been to take some profits in positions that we think could be vulnerable, and to deploy that cash when opportunities arise, which is now starting to happen.
With this in mind, we took some profits in Voltronic in Taiwan, which rose sharply during the month, as well as Wilcon Depot in the Philippines as the valuation looks stretched after a good run. Another winner in the month was car rental company Sixt. Sixt reported very strong third quarter results and raised its annual profit guidance by around 50%. The company has been benefiting from high rental rates especially in the US, as demand for leisure and business travel picks up and there remains a shortage of available vehicles. We think demand will remain strong and we increased the position size.  
In terms of other fund activity, this was muted during the month, but we did add two new positions that are listed in Sweden. Sdiptech is an industrial holding company focused on acquiring great businesses in areas such as water and energy management and infrastructure solutions. It has a strong focus on companies that help improve the environment and recently raised its acquisition targets. Bufab is a high-quality industrial distributor that we expect to be a long-term compounder.  Both stocks fit well with our investment criteria, and we anticipate healthy returns over time from these positions.




Written by Toby Woods, Senior Investment Analyst

Growth UK & Europe Fund

The Growth UK and Europe Fund returned -0.6% for the month, bringing it to a 12-month return of 41.1%.

When this monthly return is put in context of the overall European small cap market declining by 4.5%, this is a robust performance. The market has been beset with issues around global supply chains which has started to be revealed in corporate earnings disclosures. Meanwhile, bond yields have been increasing which has negatively affected growth stocks. We do not think that logistics and supply issues are over, especially as we move towards the busiest part of the year for many companies, particularly retailers. We have therefore been taking profits in positions we see at risk, and are taking advantage of opportunities created by the volatility for those stocks least or not affected at all.

Under these circumstances, we entirely exited our position in Elmos Semiconductor which we view as a typical example of a company caught in supply issues as it relies on the delivery of microchips from Asian foundries. We sold some of our holding in Inficon, a supplier to the semi conductor industry, and subsequently bought the shares back 15% lower illustrating our ability to be nimble around the market gyrations. We increased our holding in DiscoverIE during a capital raise in conjunction with two bolt on acquisitions (which initially pushed the shares up 25%). Finally, we completed the sale of our holding in NFON as we are concerned about second half of the year profitability.

We initiated one new position in the fund this month, Swedish company Bufab. This is a supplier for so called ‘C-parts’ (fasteners, clamps, valves, nuts, bolts etc) which are individually low in value yet high in number and are critical parts for industrial production. Although it may experience some short-term disruptions itself, the current backdrop provides strong tailwinds for its customer base to source through logistic outsourcing partners such as this. It has global scale, which sets it apart from most competition, and acts as a market consolidator with an active M&A strategy. 




Written by Guy Thornewill, Head of Research UK & Europe and Senior Investment Analyst

Global Growth 2 Fund 

The Global Growth 2 Fund returned -3.7% for the month, bringing it to a 12-month return of 13.3%.

This was a disappointing month for performance, but the context is relevant as global equities had their worst month since the start of the pandemic, and it comes after three very strong months for the fund. The S&P 500 fell 4.8% in September and European stocks were down about 3.5%, with growth stocks in particular suffering given the rise in US bond yields.

We wrote last month that we were concerned about worsening global supply chain issues. The Delta variant was causing factory and port closures in Asia, and raw material and shipping costs were remaining high. During the second half of September we started seeing the inevitable profit warnings, and we think there are many more to come. The recent rise in global energy prices is yet another issue for investors to contend with, and inflation fears are on the rise again. We had been taking some profits in some recent winners earlier in September, and we are now beginning to deploy some of that cash as opportunities are created. However, we do remain somewhat cautious as it appears supply chain issues won’t be fixed overnight, and we expect further corporate earnings downgrades.

An example of this is Nike. The company saw very strong demand in the third quarter, but due to factory closures in Vietnam it was not able to procure enough supply, causing the company to downgrade its guidance. We had reduced our weighting in Nike ahead of the warning, but we could have done more. If the shares get over-sold, we will be sure to step back in. On the positive side, car rental company Sixt announced a 50% upgrade to its profit guidance for 2021, as it has been benefiting from very strong rental rates especially in the US, as demand for leisure and business travel picks up and there remains a shortage of available vehicles.

In terms of fund activity, we added positions in Eurofins Scientific and Universal Music Group (UMG). Eurofins offers food, pharmaceutical and environmental testing, and should be relatively immune from the current supply chain and cost issues while enjoying solid organic growth. UMG is a play on the rapid growth of music streaming worldwide and recently listed.


Information is current as at 30 September 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.