3/8/2021 11:00:00 PM

Fund Reviews: Global Growth

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Read the latest on our Global Growth funds: Global Growth, Growth UK & Europe, and Global Growth 2.

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

Global Growth Fund 

The Global Growth Fund rose by 1% in February, leaving it up 30.3% over the 12 months to date. The cash level at the end of February was 21%, up from 16% at the end of January.

The fund made a small gain during the period, but less than the global smaller company indices due primarily to our underweight position in the US, where valuations have been extended for some time in our view. However, highly valued US growth stocks made further progress at the beginning of the month to extremely frothy territory. This started to reverse at the end of the month as US 10-year government bond yields rose steeply, and over-valued growth stocks saw some large falls. It is a fair criticism, and one that we make of ourselves, that we have been early in taking profits in some of the highly valued growth stocks that we held. However, entry points are key in generating long-term returns for clients, and we try to avoid investing in stocks where the market has already priced in many years of future growth potential. We currently see better long-term value in some European and emerging markets, which is where we have focused our recent research efforts.

Regarding performance for February, this was aided by another set of great results for Swedencare, which enjoyed 32% organic growth in the final quarter of 2020. We have taken some profits in this company in recent months, but the long-term runway for growth is still huge, the pet care theme is alive and well and the company published some aggressive new medium-term targets. We will stick with it now. ATS Automation Tooling was another good performer, as it published a strong order book and investors appreciated its recent European acquisition. On the negative side, Fashionette and NHN KCP performed poorly due to profit taking in companies that had been Covid beneficiaries.

In terms of activity, we exited our remaining shares in DO & Co after a quick 30% return as we felt this provider of airline catering had run too far, especially as restrictions on international travel look set to last for most of 2021. We established one new position in Traxion, a Mexican logistics company, which has an excellent track record of growth and trades at a low multiple.




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

Growth UK & Europe Fund

The Growth UK & Europe Fund was up 2.5% in February, leaving it up 39.5% for the 12 months to date. The cash level at the end of February was 28%, up from 21% at the end of January as the cash bid for IMImobile was completed.

The fund had a good month, largely driven by performances from Sdiptech and Swedencare. Sdiptech is a position we established towards the end of 2020, and it has had a great start to 2021 with the shares up about 40% so far. Sdiptech is an investment company that is building a portfolio of high growth and high margin businesses involved in the water, energy and infrastructure markets. The jump in February stemmed from another deal, as it announced the acquisition of a high margin UK company active in the electric vehicle charging sector. Growth in this market is set to be strong for many years, and Sdiptech has further boosted its green credentials with this purchase, a factor which is becoming very significant for European investors. Swedencare reported a great set of results, enjoying 32% organic growth in the final quarter of 2020 and it published some aggressive new medium-term targets. We have taken some profits in this company in recent months, but the long-term runway for growth is still huge and the pet care theme is alive and well.

On the negative side, some of our previous covid winners such as Fashionette and Westwing suffered from profit taking as investors moved towards recovery plays.We had already taken substantial profits in Westwing given this likely move, and we also exited our final holding in Shop Apotheke during the month close to its highs. Our other exits were in DO & Co, which had performed well but where we feel news on international travel has worsened, and Invisio where we felt the recent results were not supportive enough of its high valuation.

New positions established during the month were in Bytes Technology, which is a UK based IT reseller with an excellent track record, and Encavis, which operates solar and onshore wind farms. Encavis had sold off more than 30% from its peak earlier in the year, providing us with a good buying opportunity in a company we have followed for some time. 




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

Global Growth 2 Fund 

The Global Growth 2 Fund fell 0.6% in February, leaving it up 15.1% for the 12 months to date. The cash level at the end of February was 11% down from 12% at the end of January.

The fund had soft performance during the month, which we attribute to market-based factors rather than any issues with the underlying investments. During February, the yield on US 10-year government bonds increased steeply, as fixed income investors started to worry about the impact of inflation from all the current and future government stimulus programmes. Typically, we invest in high quality growth companies which at times can be highly valued but which offer excellent long-term returns. The valuations of these companies can reduce somewhat as interest rates rise, as investors use a higher discount rate on future cash flows, and indeed this happened in February to positions such as Cellnex, Equinix, Orpea and many of our mega-cap technology holdings. The fundamentals of these companies remain excellent, and are not impacted by higher rates, and so we have been using the price weakness to top up holdings from cash. While interest rates could rise further from here, we currently view this as mostly a ‘normalisation process’, after a period of exceptionally low rates due to the pandemic, and we are not yet concerned about higher inflation in the medium term.

On the positive side of the ledger, the fund’s holding in Whitbread performed well and we added to the position during the month. While we remain bearish on international travel prospects in the short-term, the UK has made great strides in its vaccine roll-out, and we think consumers will be eager to travel inside the UK as lockdowns begin easing over the next couple of months. As the leading UK budget hotel operator, Whitbread should benefit.

New positions purchased in the period included Tomra (a European leader in recycling equipment), and ATS Automation Tooling (a Canadian automation equipment provider), as we are increasing the fund’s exposure to high quality industrial businesses as global economies continue to recover from the pandemic.To fund these purchases, we exited Soitec after it reached our valuation target, as well as CDW and Zoetis which had both performed well and where we felt the valuations had become too rich for the growth on offer.

Information is current as at 28 February 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.