Fund Reviews: International Team

Monday 7 October, 2019

Fund Reviews: International Team

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

Growth UK & Europe Fund 

The fund fell 3.1% during the third quarter of 2019.

Top positive contributors for the quarter were IMImobile (LSE:IMI) and Iomart (LSE:IOM). IMImobile announced an acquisition in the US, providing it with a solid platform for faster growth in this important software market. 

Bottom contributors were AFH Financial (NASDAQ:AFH ) and Boku (LSE:BOKU). AFH Financial was weakened by a lack of new client activity because of Brexit uncertainty. The company is still generating high, single-digit growth in net fund inflows from existing clients, and announced several smaller acquisitions during the period. This means estimates have not been cut, and with its shares trading on a prospective EV/EBITDA ratio of just 5x, we believe it looks very good value here. Boku suffered from profit taking during the quarter despite posting solid results. 

The only new position added in the quarter (we also added it to the Global Fund) was Nabaltec (XTRA:NTG), a German chemical company. This company has high market shares in niche chemical products and high insider ownership. We also believe that its coatings product for EV batteries could turn out to be a hidden gem, and that this is not yet recognised by the market.

The positions in MIPS (OM:MIPS) and STM Group (LSE:STM) were sold during the period. MIPS is a fantastic company but simply became too expensive after increasing over 200% since purchase, and STM Group was sold after continued poor execution by the management team. Good management teams are critical for small-cap investing, and exceptions rarely work out. We also exited the position in the Exchange Traded Fund short the FTSE 250 index in the UK. 

As well as ongoing Brexit drama, UK small-cap investors had to deal with the fallout from the issues at Neil Woodford’s large funds, where redemptions were frozen after poor performance caused significant outflows. Whilst none of the fund’s holdings were directly impacted, the event does highlight the risks of investing in illiquid companies, and we continue to increase the liquidity profile of the fund. Finally, we increased the sterling hedge to 95% during the quarter after it became apparent UK Prime Minister Boris Johnson was pushing for a no-deal Brexit, and sterling volatility has certainly increased again with the ongoing high political drama.


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

 Global Fund 

The fund rose 1.2% during the third quarter of 2019.

Top positive contributors were technology companies LivePerson (NASDAQ:LPSN) and Iomart (LSE:IOM), and renewable energy company NextEra Energy Partners (NYSE:NEP). Pie’s Australasian funds also made another solid contribution. LivePerson was particularly strong, rising almost 30% as new customer signings grew strongly for its Communications Platform-as-a-Service software product, which will help transform the way brands communicate with customers.

The bottom contributors were technology companies Dotdigital (LSE:DOTD) and Boku (LSE:BOKU), which both gave up gains made in the second quarter, due to profit taking and a UK equity market lacklustre in the face of ongoing Brexit uncertainty. Both companies reported robust results or trading updates during the quarter, and both remain undervalued in our opinion.

The period was busy for portfolio activity as we started to deploy more cash and exited two manager holdings, replaced by direct equity holdings. New positions were added in GB Group (AIM:GBG) , a digital identity services provider, Nabaltec (XTRA:NTG), a German chemical company also purchased for the Growth UK & Europe Fund (UKE) and which we discuss further in UKE’s update, PCA, a Japanese software company, Bakkafrost (OB:BAKKA), a European salmon farming company, Lisi (EPA:FII), a French industrial fastener company and the UK rail software and services company Tracsis (AIM:TRCS). 

Most of these companies have leading market shares in niche areas and high levels of insider ownership, which remain key criteria for us before investing. GB Group should benefit from the ongoing wave of regulation hitting all our digital lives, as well as companies’ increasing efforts to combat digital fraud.

In other activity during the quarter we exited the position in the Exchange Traded Fund short the Russell 2000 index in the US, and sold the position in Issuer Direct. 


 Written by Bianca Fledderus, Investment Analyst and Portfolio Manager

Conservative Fund

The fund rose 1.7% during the third quarter of 2019.

Key contributors were the fund’s exposure to Pie’s Australasian funds. In September we also initiated a 5% position in international fixed interest, to diversify our income-generating holdings away from term deposits. We bought a global fixed interest Exchange Traded Fund, and will gradually increase this position over time.

During the quarter, the Reserve Bank of New Zealand (RBNZ) cut the official cash rate (OCR) by 0.50%, double the expected cut of 0.25%. The RBNZ’s Monetary Policy Committee said a lower OCR was needed to continue to meet its employment and inflation objectives. The OCR is now at 1.00%, and another rate cut in the near future is likely. The OCR cuts have impacted the term deposit rates we’re getting for the invested cash in the fund, however the improved fund composition, including its new exposure to fixed interest, should be positive for future long-term performance.

The conservative fund paid a quarterly distribution of 0.5 cents per unit.


 Written by Doug Jopling, Senior Investment Analyst and Portfolio Manager

 Multi-Strategy Fund 

The fund fell 4.9% for the quarter ended 30 September. 

July was focused on implementing the new strategy by selling some of our old legacy positions and initiating new positions in high-growth US momentum stocks. The markets then experienced high volatility in August with the US Nasdaq market falling 2.6% over the month, while Multi-Strategy increased by 0.4%, due to hedging the market; shorting US futures and Red 5 (ASX:RED) benefitting from an increasing gold price and positive, company-specific news. At the start of September we saw extreme rotations out of momentum stocks and into value stocks. Market commentators stated it was the largest rotation of the last 10 years. Unfortunately our hedges didn’t protect us, as the market remained largely flat while some sectors increased and others fell. We’re aware of other hedge funds, and long investors with large exposure to momentum, who were also adversely affected by the shift. 

The top contributor was Red 5 which increased from $0.18 to $0.30. We sold half of our position at a range of $0.28 to $0.36. This was a high-conviction pick, acquired in April for $0.11. 

At the start of September we saw extreme rotations out of momentum stocks and into value stocks.

The main detractors to performance in July were our legacy positions in Northern Oil and Gas (NYSE:NOG), Medallion Financial (Nasdaq: MFIN) and Rosehill Resources (Nasdaq:ROSE). The main detractors in September were the high momentum US growth names.

As part of our new strategy we exited old legacy positions in Medallion Financial and Northern Oil & Gas. We also exited AVEO Group (ASX:AVEO) after the company received a bid and exited Poseidon Nickel (ASX:POS) after the share price increased following Nickel price increases. We also added a new position in Nickel Mines (ASX:NIC). 


 Written by Victoria Harris, Senior Investment Analyst and Portfolio Manager

 Climate Friendly Fund 

The fund delivered a +0.1% return for the quarter. 

Top contributors were IT reseller, CDW (Nasdaq:CWD), animal health company, Zoetis (NYSE:ZTS) and renewables company, NextEra Energy Partners (NYSE:NEP). CDW produced another strong result early in the quarter, plus it was added to the S&P 500 Index. Both factors resulted in a strong price reaction. Zoetis continues to experience strong demand for its pharmaceuticals from increased consumption of livestock and increased pet ownership globally, and NextEra continues to benefit from increased investor demand for renewable assets.

Bottom contributors were Chinese online marketplace, (NYSE:WUBA), and payments companies, PayPal (Nasdaq:PYPL) and Euronet Worldwide (Nasdaq:EEFT). was impacted during the quarter by continued trade war volatility, as well as President Trump’s threat to restrict flows from US portfolios into China. This saw a sell off in Chinese companies listed on US exchanges, including Whilst this frustratingly impacts some positions in the Fund in the short-term, we remain positive on the long-term fundamentals and outlook.
Euronet and PayPal both took a breather after strong runs last quarter. 

During the quarter we made a few new investments into the Fund. One was a position in a European entertainment and ticketing company, CTS Eventim (XTRA:EVD). This is a founder-led, vertically integrated business with strong cash-flow generation benefitting from the shift to online ticketing; artists increasingly needing to tour to earn income; and increased spending, particularly by millennials, on live entertainment. 

Secondly, we initiated a position in a UK-based identity services provider, GB Group (AIM:GBG). The company is well positioned to benefit from structural tailwinds from the growth in digital commerce, increased focus on frictionless transactions, ever-increasing fraud & data breaches and increased regulation and compliance globally. It has highly visible revenue, strong customer retention and is under-earning due to reinvestment. We expect, as this unwinds, that GB Group will see accelerated margin expansion and earnings growth, 

We also exited our position in Technogym (BIT:TGYM) during the quarter.

Climate Friendly Sheep

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.