We are pleased to present a summary report on the performance of the WCM Quality Global Growth Equity strategy (the Strategy) in June 2022.
The strategy1 returned -2.72% during the month. The Strategy has outperformed the benchmark MSCI All Country World Index over one month, five and 10 years, and since inception.
Notes: 1. WQG, WCMQ and WCM Quality Global Growth Fund (managed fund) have the same portfolio managers and investment team, the same investment principles, philosophy, strategy and execution approach used for the strategy WCM Quality Global Growth. it should be noted that due to certain factors, including but not limited to differences in cash flow, management and performance fees, expenses, performance calculation methods and size and composition of the portfolios, there may be discrepancies between the investment returns demonstrated by each of these portfolios and the WCM Quality Global Growth Strategy Composite (the Composite) in the future. Since WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have only been around for a relatively short time, this table references the composite to provide a better understanding of how the team has managed this strategy over a longer period. . period. Performance is net of fees and includes reinvestment of dividends and income. 2. Composite inception date is 31 March 2008. 3. Benchmark refers to the MSCI All Country World Index (with gross reinvested dividends declared in Australian dollars and unhedged). 4. Added value equals composite performance minus benchmark performance. 5. Annualized.
The strategy is readily available through four investment structures to suit the different preferences of individual investors. You can read the full investment update for each of these products at the links below:
After a brief respite in May, global equity markets continued to slide in June, capping the worst first half for developed market equities in more than 50 years. Continued high inflation, rising interest rates and worrisome signs of an impending slowdown in economic growth remain the primary concern for investors. As monetary conditions tightened, consumer confidence and other leading indicators of future economic activity fell sharply. This combination of higher interest rates putting pressure on the price/earnings multiples of growth stocks and the risks of recession negatively impacting the more cyclical segments of the market, meant that there was no hiding place in June.
All major sectors of the stock market posted negative returns for the month, including energy which is now the only sector in positive territory since the start of the year. The further easing of COVID-19 containment measures in China was one of the few pieces of good news for markets during the month. This led to a 7% rise in the Chinese stock market, which largely contributed to the outperformance of emerging markets against developed markets during the month and since the beginning of the year. In terms of style factors, growth exceeded value for the first time in 2022. The Australian dollar fell in June, partially offsetting the impact of falling markets on unhedged portfolios.
Sector allocation was the main contributor to the strategy’s outperformance in June, led by the overweight in healthcare and the underweight in energy (zero exposure) and materials. The main detractors were the overweight in information technology and the underweight in the communication services sector. In terms of stock selection, information technology and financials were the strongest contributors.
Although the first half of the year has been very difficult for the markets and many risks remain, the news is not all bad. The sharp drop in the markets has reduced valuations considerably. The Strategy’s price-to-earnings ratio has fallen from over 40 times at the end of the calendar year to around 25 times. Market weakness also provided attractive entry points for new additions to the portfolio. These new additions included technology companies such as Snowflake, Bill.com, Microsoft and Datadog, as well as railroad companies Union Pacific and Canadian Pacific.
Looking ahead, the investment team remains convinced that over the long term, being disciplined and choosing only the highest quality companies that have growing competitive advantages supported by well-aligned cultures is the best strategy for generate excess returns.
DISCLAIMER: Associate Global Partners Limited (AGP)(ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Contango Asset Management Limited (ABN 56 080 277 998), an ASX listed financial institution (CGA). CGA has prepared this document for general information purposes only for WCM Global Growth Limited, a listed investment company (ASX: WHQ).
AGP is the entity responsible for the WCM Quality Global Growth Fund (Quoted Managed Fund) (ARSN 625 955 240) (ASX: WCMQ) and WCM Quality Global Growth Fund (managed fund) (ARSN 630 062 047).
Contango International Management Pty Limited (CIML)(ABN 33 617 319 123) is the investment manager of WQG and is an authorized representative of AGP. WCM Investment Management, LLC (WCM) is the underlying manager and applies its WCM Quality Global Growth Equity strategy (the Strategy), with the exception of Australia, in the management of WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) (the Funds). WCM does not hold AFSL. WQG and CIML are part of the Contango group.
Although the strategy, with the exception of Australia, is applied to each of WQG, WCMQ and WCM Quality Global Growth Fund (managed fund), certain factors, including but not limited to differences in cash flows, fees, expenses, methods of calculating performance, portfolio sizes and composition may result in differences in the investment returns of each portfolio. The performance of the Strategy is not the performance of the portfolios and is not an indication of how WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have performed in the past or will perform in the future.
The material should not be considered a solicitation or offer of advice or services by WCM, CGA or AGP. It does not contain investment recommendations or provide investment advice. It does not take into account the goals, financial situation or needs of any particular individual. Investors should, before acting on such material, consider the suitability of the material.
Neither AGP, CGA, their related corporations, entities, directors or officers guarantee the performance, timing or amount of return of capital or income invested in the Funds or that the Funds will achieve their investment objectives. Past performance is not indicative of future performance.
Economic or market forecasts are not guaranteed. Any reference to particular securities or sectors is for illustrative purposes only and applies as of the date of publication of this document. This is not a recommendation of any named securities or sectors and no guarantee is given that the positions will remain in the fund’s portfolio. All securities identified and described are for illustrative purposes only and do not represent all securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified has been or will be profitable.
Investors should seek professional investment, financial or other advice to assist the investor in determining individual risk tolerance and needs to achieve a particular return on investment. Investors should in no way rely on the information contained in this document.
Investors should read product disclosure statements (PDS) of the Funds or any relevant offering document in its entirety before making a decision to invest in such products.