A strong outlook for the year ahead

The Fund returned +2.9% in December, outperforming the benchmark return of +1.2%.

Top Holdings (alphabetically)

Dino Polska

Poland

Consumer Staples

Nagarro SE

Germany

Information Technology

Orion Engineered Carbons

United States

Materials

PRA Group

United States

Financials

Softchoice Corp

Canada

Information Technology

Global equity markets recovered in December from the previous month’s slump, ending the year on a strong note. Although the Omicron variant of COVID-19 that surfaced in November proved to be more infectious than the Delta strain, investor fears quickly dissipated as Omicron appears to be neither as severe, nor as vaccine-resistant, as initially anticipated.  As a result, most countries have not imposed major restrictions. Equity investors continued to focus on the strong corporate earnings outlook for the year ahead now that the economic recovery is less likely to be disrupted by COVID-19.

The equity markets that suffered most in November, such as the UK and Europe, outperformed the U.S. during the month.  The Federal Reserve announced a doubling in the pace of its tapering from January 2022, while the Bank of England and a few other central banks in continental Europe increased short-dated rates. These actions helped to alleviate concerns over inflation and an overheating of the global economy.  The Bank of Japan remained an outlier, adhering to its stimulus policies, which sent the yen to multi-year lows. Developed equity markets finished 2021 with a 4% gain in December, measured by the MSCI ACWI index, capping off a strong year.  Emerging markets were also up in December, posting a gain of 1.9% as measured by the MSCI Emerging Markets index.  Despite the positive performance in December, Emerging Markets ended the year in negative territory, falling -2.5%.

Individual stock selection and currency were the main drivers of outperformance versus the benchmark in December.  The Fund’s overweight position in smaller-cap names (companies with market caps of under $2bn) also drove performance against the benchmark, as those positions contributed to 1.6% of the Fund’s total performance vs -.1% contribution to the benchmark. Approximately 157 bps separated the top contributor and largest detractor.  As of 31^st December, the top 10 holdings accounted for approximately 29% of the Fund’s assets, with the largest position approximately 3.5% of the portfolio.  Regional and sector exposure remained relatively unchanged month over month.

Average cash holdings were stable month over month.  The Fund marginally increased and trimmed several positions.  Deliveroo was trimmed as food delivery services in Europe continue to face regulatory pressure related to their labour forces.  We also trimmed PRA Group in the US on the back of strong stock performance.  PRA is still a meaningful position in the Fund but was reduced to better reflect our assessment of the current risk-reward.