Several new names enter the portfolio

The Fund returned +0.91% in August, underperforming the benchmark return of 1.70%.

Full written commentary available HERE

Top Holdings (alphabetically)

Cerved Group Italy Financials

Dino Polska Poland Consumer Staples

Enghouse Systems Canada Information Technology

Kindred Group PLC Malta Consumer Discretionary

TFI INTERNATIONAL INC Canada Industrials

Favorable global trends surrounding COVID-19 cases, optimism of a viable vaccine, and better than expected corporate earnings fueled investor appetite for equities, sending global markets upward for another month.  

In the U.S., the rise in markets was led by consumer discretionary and information technology stocks. The Federal Reserve formally announced its switch to an average inflation targeting regime of 2%.  As a result, the U.S. dollar traded lower against most major currencies except the yen.

The U.S. presidential campaign has continued to gather steam with the nomination of Kamala Harris as Joe Biden’s Democratic Party running mate and the official nomination of Donald Trump as the Republican nominee, leading to one of the most interesting U.S. presidential elections in decades.  Markets will likely be volatile approaching the November elections.  The economic policies from the two parties are vastly different and will impact both the economy and the markets well beyond 2020.

In Europe some regions have experienced a second wave of COVID-19, however, due to better testing and contact tracing, policymakers have been able to implement measures to help curtail the spread.  Europe continued to be propelled by the 750bn Euro stimulus package announced in July. Major European markets ended higher for the month, led by France and Germany.  The CAC 40 was up 3.4% while the DAX was up 5.1%.  U.K. equities lagged with the FTSE advancing 0.70%.

In Japan, the surprise announcement that Japanese Prime Minister Shinzo Abe is stepping down due to health reasons caused a brief sell-off.

Emerging markets posted a positive month but lagged developed markets despite the weaker dollar. COVID-19 outbreaks in Brazil and Turkey sent markets to broad losses as both economies are forecasted to contract in 2020 by approximately 10%.

Individual stock selection and currency were the main drivers of the Fund’s performance in August.

Dampened volatility in the global equity markets was reflected in the Fund as approximately 108 bps separated the top contributor and largest detractor.  As of 31^st August, the top 10 holdings accounted for approximately 38% of the Fund’s assets, with the largest position approximately 4.3% of the portfolio, relatively unchanged from the previous month.  Regional and sector exposure remained consistent month over month. The Fund has outpaced the benchmark 9 out of the past 11 months and 10 out of the last 15 months.  Over the past year, the Fund’s upside capture has been 133% while the downside capture has been 95% vs. the benchmark generating approximately 8% of alpha.  Cash holdings were unchanged month over month at 4%.

Over the month we added several new names to the portfolio and increased holdings in existing positions. 

Luxembourg based Orion Engineered, is a company that we know well and have invested in historically.  They produce specialty chemicals and are one of the world’s leading suppliers of Carbon Black, a product that is used in coatings, printing inks, polymers, rubber, and other applications. We believe that the company will appreciate and benefit from improved manufacturing volumes.

We continue to build positions in new additions to the portfolio and will discuss them broadly.  These companies span a diverse set of industries and geographies including an India based outsourced research and development business, a Brazilian based education company, a European brokerage business, and a U.S. based used luxury goods marketplace.  We also reinvested in a Netherlands based fitness and lifestyle business that should continue to grow over time.

We are excited about these opportunities and will provide additional details as we build up the positions.

The Fund exited the position in BIM Birlesik Magazalar A.S., a long term holding of the Fund that specializes in discount food retail.  We exited the position primarily due to currency risk surrounding the Turkish Lira. We also reduced our position size in Swedish Match.  Its valuation has increased substantially compelling the Fund to realize the gains in the position.