8/7/2020 12:00:00 AM

Fund Reviews: Global Growth

Written by Toby Woods,  Senior Investment Analyst for Global and UK & Europe Funds

Global Growth Fund  (Previously Global Small Companies) 

The Global Growth Fund was up 1.5% in July, leaving it up 18.4% for the past 12 months. The cash level as at 31 July was 23%, down from 24% at the end of June.

With global markets drifting higher in July, we continued to take profits from some winners. We sold our remaining position in HelloFresh, which has been an excellent investment since the original purchase in October 2019, rising over 200%. Demand for meal kits continues to benefit from households staying at home, but as Western economies begin to normalise we feel visibility of future demand has reduced, while the shares now command a steep valuation. We also sold our position in Flatex, which had performed strongly, after some internal selling.

In July we bought shares in the only pure-play data-centre operator listed in Korea, KINX, set to benefit from strong Korean internet data traffic growth of around 30-40% per year. The share trades at discount of around 50% to global data-centre peers. We have been researching the development and benefits of the rollout of 5G globally, and with exponential data growth predicted in the years ahead, data centres are one way to play this theme. We also added Swedencare, a Scandinavian healthy pet food supplement provider, following a significant acquisition of a US business, Stratford, that propels the company to a much more meaningful size with increased opportunities. Finally, we invested into US energy drinks company Celsius which has strong growth momentum thanks to its focus on fitness-conscious consumers.

Notable performers in the month were NextEra Energy Partners (NEP), NHN KCP Corp, and IMImobile. NEP delivered a strong set of Q2 figures, outlining the robust nature of renewable energy demand. IMImobile rose sharply after strong results, yet remains at a discount to peers. Notable underperformers were Boku, giving up the gains from last month following the acquisition of peer Fortumo, and OMA, a Mexican airport operator which remains volatile despite having a rock-solid balance sheet and delivering better-than-expected figures. Lastly, Belgium cinema operator Kinepolis suffered from delays in blockbuster film releases and threats of local lockdowns, but has the balance sheet to cope with this and will likely emerge as a winner, prompting us to add to the position.

Finally, the Chinese market was particularly strong in the last month. We participated in the rally through our holding of the William Blair Emerging Markets Small Cap Growth Fund, which gives us diverse regional exposure.




Written by Toby Woods, Senior Investment Analyst for Global and UK & Europe Funds

Growth UK & Europe Fund

The Growth UK & Europe Fund was up 4.1% in July, leaving it up 4.4% for the past 12 months. The cash level at 31st July was 19%, down from 24% at the end of June.

Continental European markets generally made steady progress in July, despite some concerns over rising Covid-19 cases. The UK, however, remained subdued as Brexit hit the headlines again. The prospect of a comprehensive trade deal diminished following comments from both sides after another round of negotiations. We are continuing to pivot our new investments away from the UK as we believe the risk of economic downside remains greatest here. We have also continued reducing some of our long-term UK positions too, such as Tracsis, a UK-based railway software and events business.

During July, we took profits from strong recent performers such as Shop Apotheke and Invisio. Shop Apotheke is the largest European online pharmacy, and has been a big beneficiary of the Covid-19 crisis. However, having seen the share price increase by almost 200% since our purchase in March, we feel there is reduced upside in the short term, although we believe it’s a long-term winner especially thanks to impending favourable regulation changes in Germany. Invisio is a Swedish supplier of communication and ear-protection equipment for military and emergency services. The investment thesis has not changed throughout the crisis, resulting in strong share-price performance, but once again this leaves little short-term upside.

We bought shares in in Westwing Group, a German online home furnishings business, due to continued strength in online shopping. We sold our shares in Accell, a Dutch bicycle manufacturer. Although demand for bicycles remains strong, Accell was struggling to source all the parts which delayed customer purchases. The company has a weak balance sheet so we were concerned additional costs to secure parts would be too much of a stretch on their liquidity position. We also sold our position in Flatex, which had performed strongly, after some internal selling.

Aside from Shop Apotheke and Invisio, other notable performers in the month included Swedencare, DiscoverIE and IMImobile. Swedencare’s shares continued to increase following the acquisition of Stratford in the US, and DiscoverIE has gathered momentum following a robust trading update. IMImobile rose sharply after strong results, and it remains the fund’s largest holding. Poor performances were registered from Kinepolis, the cinema operator affected by delayed blockbuster releases, and Boku, which gave up the gains from last month.




Written by Victoria Harris, Senior Investment Analyst and Portfolio Manager

Global Growth 2 Fund (formerly Climate Friendly)

Global equity markets continued their strong rally in July despite flare ups of new Covid-19 cases globally, continued US-China tensions and depressed economic data. Government stimulus continues to provide some necessary support in many developed markets and changes in consumer behaviour are leading to the significant outperformance of some sectors e.g. technology. The S&P500 is now only a few percentage points away from pre-Covid levels. Global Growth 2 finished the month up 5.3% versus its Index (MSCI ACWI Low Carbon Leaders Index (NZD)) up 2.0%.

Performance during the month was driven by online pharmacy company Shop Apotheke, Chinese technology giant Alibaba, and renewables operator NextEra Energy Partners (NEP). NEP reported a strong second-quarter result during the month, giving investors confidence in the resilience of its business model which is a big positive in today’s uncertain world. The company has been long-term position in the fund and pays a 4% yield - very attractive in today’s low-interest rate environment. We continue to like the prospects for future renewables development, plus NEP’s flexibility to finance its growth over the long term.

Underperformance came from digital printing solutions company Kornit Digital, global IT company Microsoft, and conversational commerce company LivePerson. Microsoft reported its fourth quarter result during the month and despite delivering a result ahead of market expectations, there was some deceleration in growth rates, particularly in its cloud-computing division, Azure. Microsoft shares were up over 50% since March lows, so naturally the shares saw some pressure post this announcement. Microsoft has all the tools to capitalise on the changing trends of how we communicate and transact business due to the recent crisis and is well placed to benefit for multiple years to come.

We are just over halfway into US reporting season and so far, most companies have reported results above expectations, supporting valuations going forward. However, company guidance continues to be rare as management teams continue to experience significant uncertainty. Thus, we continue to favour well-run companies with strong revenue visibility and unlevered balance sheets while this uncertainty remains. 


Past performance is not an indicator for future performance. This is not intended to be financial advice and does not take into account any particular person’s circumstances. Before relying on this information, please speak to an independent financial adviser. Pie Funds is the issuer of the Pie Funds Management Scheme. For access to the PDSs, please click here.

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