A strong start to the new fiscal year

The Fund returned +5.95% in July, outperforming the benchmark return of +2.04%.

Top Holdings (alphabetically)

Brenntag AG

Germany

Industrials

Deliveroo PLC

United Kingdom

Consumer Discretionary

Sendas Distribuidora SA

Brazil

Consumer Staples

Softchoice Corp

Canada

Information Technology

TFI INTERNATIONAL INC

Canada

Industrials

The global equity market had its sixth consecutive month of positive performance in July as the year-long rally continued.  Investors continued to shake off inflationary concerns and remained optimistic due to strong corporate earnings, positive economic indicators, and unwavering support from central banks. Despite an uptick in COVID-19 cases linked to the Delta variant, the continued reopening of economies in developed markets led to positive market returns.  Developed markets led by the United Kingdom, United States, and continental Europe, finished in positive territory.

In the US, investors weathered a choppy month due to inflationary fears and the continued spread of the Delta variant. Broad-based indices were positive on the month, bolstered by positive corporate earnings. As July closed, 221 Standard & Poor’s 500 companies had reported, with 91 percent of those beating Wall Street’s estimates.  In Europe, concerns over the resilience of the economic recovery tested support for the major indices, resulting in mixed results across the region.   Overall, the Eurozone ended the month up 1.79% as measured by the MSCI Europe Index.  Despite a continued rise in new COVID-19 cases, vaccine rollouts accelerated with Spain, Italy and Germany all overtaking the US in terms of the share of people fully vaccinated, boosting hopes that rising cases of the Delta variant would not necessarily lead to further lockdowns and restrictions on economic activity.

The Japanese stock market ended July in negative territory as market sentiment was dominated by the increase in COVID-19 infections due to the Delta variant. Restrictive measures were re-imposed in Tokyo in early July and added to investor anxiety.  Asia ex Japan equities also recorded a negative return in July, led lower by China after a crackdown by Chinese authorities on technology and education companies prompted a sharp sell-off. Chinese shares fell 13.84% measured by the MSCI China Index and spilled over to Hong Kong with the MSCI Hong Kong index ending the month off -2.88%.  While most developed markets posted positive returns, China led emerging market indexes sharply lower.

The Fund had a strong start to the new fiscal year with individual stock selection being the main driver of performance in July.  Approximately 72% of the names in the portfolio provided positive contributions while the top 5 names accounted for over half of the Fund’s performance. Approximately 127 bps separated the top contributor and largest detractor.  As of 31^st July, the top 10 holdings accounted for approximately 32% of the Fund’s assets, with the largest position approximately 5.2% of the portfolio at the end of the month. Regional and sector exposure remained consistent month over month and the portfolio had positive contributions across every sector and region.

During the month we added two new positions to the Fund.

Countryside Properties is a homebuilder in the UK focusing on development of public land.  The company’s largest division operates in a market niche, partnering with local governments to develop communities in the UK. The company has recently announced a strategic shift, focusing all deployment of capital into this high return division. Countryside Properties helps address the significant housing shortage in the UK and will continue to have ample opportunity to grow in the partnership business.

We also initiated a smaller position in Balfour Beatty, a UK based construction business.  This company operates on a global basis focusing mainly on infrastructure and non-residential construction. Balfour Beatty is run by an exceptional CEO, Leo Quinn, who incidentally started his career at the company as a civil engineer.  We believe the business is positioned well for margin improvement and generates significant free cash flow.

The Fund exited two notable positions this month.  51Job, a Chinese online job classified business, was sold after a deal was announced to take the company private.   The Fund also exited Logista, a Spanish logistics and distribution business.