Idiosyncratic idea generation

The Fund returned 0.7% in December, outperforming the benchmark return of -0.7%.

Top Holdings (alphabetically)

Cerved Group Italy Financials

Enghouse Systems Canada Information Technology

Kruk Poland Financials

Swedish Match AB Sweden Consumer Staples

Wizz Air Holdings Switzerland Industrials

The year of 2019 began with a strong rally in the stock market and ended in the same impressive manner.

Global stock prices ended the month higher as investors responded favourably to the U.S. / China Phase One trade agreement and to increasing visibility into the timeline of the UK’s exit from the European Union.

The equity markets were fairly unphased by the formal impeachment of President Trump which was passed by the US House of Representatives. While the economic consequences of Brexit are still to be determined, the recent results boosted the pound and the UK equity market. Asian markets remained relatively weak although Hong Kong recovered in the month despite the ongoing demonstrations. Emerging markets performed well in December but lagged the developed markets for the year.

The Fund’s outperformance versus the benchmark in December was driven primarily by stock selection. There was little dispersion in our performance with only ~108 bps separating the top contributor and largest detractor. As of 31st of December, the top 10 holdings accounted for approximately 40% of the Fund’s assets, with the largest single position representing approximately 4.5% of the portfolio. Emerging market positions outperformed developed market positions. December capped off the third straight month that the fund has outpaced the benchmark.

Idiosyncratic idea generation continued to be a key theme in December, resulting in the addition of several new positions to the portfolio. A number of regions and sectors are beginning to display excellent value, which we will highlight in coming months.

In December, we added a small franchise-based restaurant operator in Korea. The business continues to create excellent unit economics for its franchisees, has a great value price point and investment from a growth equity business in Korea should continue to propel the business going forward.

In addition, we added two technology firms and a transportation and logistics company to the portfolio last month.

The first position is a Singapore based company called Flextronics. Flextronics is a multi-national technology manufacturer that seems like a long dormant business. The company is under new management who is focusing on disciplined growth in profitability. We think there is significant scope to improve the margins and returns in this business going forward.

The second company is called Rexel. Rexel has a similar technology business as Flextronics but based in France. It is a leading electronics distributor in Europe that has faced constant headwinds for the last few years. Management is focused on improving returns and margins and you are already seeing this take hold in the income statement.

The third company is TFI, they specialize as a transportation and logistics company based in Canada. TFI is led by an aligned management team with a fantastic track record of creating value through very disciplined capital allocation and efficient operations. The company has created an excellent market position in Canada and continues to expand in America. We believe management will continue to deploy capital and generate great returns for us as shareholders over time.