Monthly Report - April

1. Continued geopolitical and economic headwinds, particularly for the quality growth holdings targeted by the strategy.
2. New positions added to benefit from de-globalisation and industrial onshoring.
3. Notwithstanding compelling company fundamentals, Chinese exposure was reduced due to increased country risk concerns.

Markets have been buffeted by stubbornly high inflation, aggressive interest rate hikes, the ongoing war between Russia and Ukraine, and COVID-19 lockdowns in China. The MSCI ACWI Index declined by 8%, the worst monthly performance since the onset of the COVID-19 pandemic in March 2020. Growth stocks led the way down, continuing their year-to-date underperformance — the MSCI ACWI Growth Index has declined nearly 20% in 2022. Declines were broad across sectors and regions. The US performed the worst due to the sharp decline in technology stocks; the NASDAQ Index had its worst month since October 2008.

The Portfolio fell -6.5% in April, compared to the Index (MSCI All Country World Total Return Index (net) in $A) which fell -2.8% for the same period.

Top Holdings (alphabetically)

Alphabet Inc

United States

Communication Services

Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.

Amazon

United States

Consumer Discretionary

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company products include books, music, computers, electronics and numerous other products. Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers. Amazon also operates a cloud platform offering services globally.

Deere & Co

United States

Industrials

Deere & Company manufactures and distributes a range of agricultural, construction, forestry, and commercial and consumer equipment. The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services. Deere and Company extends its services and products worldwide.

First Republic Bank

United States

Financials

First Republic Bank and its subsidiaries provide private banking, private business banking and private wealth management in urban, coastal markets in the U.S. First Republic delivers relationship-based service by providing a single point of contact for all of its services.

Meta Platforms Inc

United States

Communication Services

Meta Platforms, Inc. operates as a social technology company. The Company builds applications and technologies that help people connect, find communities, and grow businesses. Meta Platform is also involved in advertisements, augmented, and virtual reality.

Microsoft

United States

Information Technology

Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.

Schneider Electric SE

France

Industrials

Schneider Electric SE manufactures electrical power products. The Company offers car chargers, home security goods, light switches, access control, sensors, valves, circuit breakers, cables, accessories, signaling devices, fuse, motor starters, and voltage transformers. Schneider Electric serves customers worldwide.

SVB Financial Group

United States

Financials

SVB Financial Group is the holding company for Silicon Valley Bank. The Bank is a commercial bank that serves emerging growth and middle-market growth companies in targeted niches, focusing on the technology and life sciences industries. Silicon Valley operates offices throughout the Silicon Valley and other areas of California, as well as in other states.

UnitedHealth Group Inc

United States

Health Care

UnitedHealth Group Incorporated owns and manages organized health systems. The Company provides employers products and resources to plan and administer employee benefit programs. UnitedHealth serves customers in the United States.

Vertex Pharmaceuticals Inc

United States

Health Care

Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Vertex Pharmaceuticals serves healthcare sector worldwide.

We are mindful of evolving array of investment risks, including rising geopolitical uncertainty.

In recent months, we’ve added to our portfolio three companies that are well-positioned to benefit from these rising tensions: Keyence, Rockwell Automation, and Hexagon.

The war in Ukraine has given new urgency to the question of whether globalization has reached a tipping point and if the familiar web of decentralized, just-in-time, global supply chains will be a casualty of the inward turn dividing countries into competing trading blocs. It is probably too soon to know. It is likely, however, that companies everywhere will be reassessing presuppositions about access to low-cost transportation, cheap foreign labour, and business-friendly social and tax policies, and taking steps to minimize future supply disruptions or unanticipated regulatory shifts. At a minimum, we’d expect to see manufacturers begin to re-shore, or at least duplicate, production processes for critical operations, whether it’s setting up plants closer to their end customers or encouraging their suppliers to do the same. We’d also expect future capital expenditures and supply chain reorganizations to take full advantage of the many advances occurring across the industrial automation landscape, which are propelling leading providers of so-called “Industry 4.0” solutions which focus on interconnectivity, automation, machine learning, and real-time data like onto favourable growth paths. Keyence, Rockwell, and Hexagon are all leading enablers of different aspects of industrial automation.

We have also taken steps over the course of the past quarter to reduce our exposure to China. We have grown more concerned about the country risk associated with our Chinese shares, especially shares heavily owned by US investors, given the simmering tensions between the two nations. Our bottom-up fundamental research process continues to identify many high-quality-growth businesses in China that compare favourably with global peers, but we have decided to trim our overweight as we reassess the implications of our holdings there for overall, portfolio-level risk.

Year-to-Date Attribution Summary

• The Global Equity strategy extended its poor first-quarter performance into April, unable to escape the strong headwinds for fast-growing stocks which have continued to underperform the so called value stocks (companies trading at very low prices) by an increasing margin, with the most expensive quintile underperforming the least expensive by over 2,000 bps. The severity of these style headwinds has contributed to portfolio underperformance across all sectors and regions.
• In the face of this underperformance, we have maintained our steadfast focus on quality-growth companies which we believe offer the greatest prospects for long term outperformance.
• In certain circumstances, the elevated levels of market volatility and the severe reactions to news flow have allowed us to take of price dislocations and make portfolio adjustments at relatively favourable prices. We believe this will stand the portfolio in good stead over the longer term.