We are pleased to provide you with a summary report on the performance of the WCM Quality Global Growth Equity Strategy Composite (the Strategy) in February 2021.
The Strategy1 returned -0.2% during the month, below the benchmark MSCI All Country World Index of 1.4%. The Strategy1 has delivered returns in excess of the benchmark over the previous six and 12 month periods, as well as over three, five and ten 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 of approach as those used for the WCM Quality Global Growth Equity Strategy Composite however, it should be noted that due to certain factors including, but not limited to, differences in cash flows, management and performance fees, expenses, performance calculation methods, and portfolio sizes and composition, there may be variances between the investment returns demonstrated by each of these portfolios and the Composite in the future. As WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) have only been in operation for a relatively short period of time, this table makes reference to the WCM Quality Global Growth Equity Strategy Composite to provide a better understanding of how the team has managed this strategy over a longer period. Performance is in AUD net of fees and includes the reinvestment of dividends and income. 2. Strategy inception date is 31 March 2008. 3. Benchmark refers to the MSCI All Country World Index (with gross dividends reinvested reported in Australian Dollars and unhedged). 4. Value added equals Strategy performance minus Benchmark performance. 5. Annualised.
The strategy is conveniently available via four investment structures to accommodate the differing preferences of individual investors. You can read the full investment update for each of these products on the links below:
- WCM Global Growth Limited (ASX:WQG) (LIC).
- WCM Quality Global Growth (Quoted Managed Fund) (ASX:WCMQ) (ETMF).
- WCM Quality Global Growth (Managed Fund) (unlisted managed fund).
- WCM Quality Global Growth (Managed Fund) (hedged).
Global equity markets continued to reach new highs in early February as US president Joe Biden and treasury secretary Janet Yellen maintained pressure on Congress to pass their proposed US$1.9tn fiscal stimulus package. Investors also welcomed news about the pace of the COVID-19 vaccine rollout and new case numbers in the US dropping below 100,000 for the first time in three months. However, a sudden sharp rise in global bond yields dampened this investor optimism, leaving markets off their highs by month end. The yield on the US 10-year Treasury reached a 12-month high of 1.6% with concerns growing around the potential impact on global inflation from the expected strong economic rebound in 2021. This increase in interest rates was the catalyst for the underperformance of emerging relative to developed markets and quality and growth factors relative to value. At an individual sector level energy and financials led the way with the lagging sectors including healthcare and consumer staples. The Australian dollar was stronger during the month reducing returns for unhedged portfolios.
The portfolio’s financial sector holdings were amongst the positive contributors to returns in February. The technology and industrial sectors also provided some names which outperformed the market. On the flip side, healthcare and consumer staples were relatively weaker. US private bank and wealth management services provider, First Republic Bank has been a core financial sector holding in the WCM Quality Global Growth portfolio since March 2017. It focuses on the affluent in attractive markets and does not try to be all things to all people. WCM views it as a service company whose product happens to be banking. Its extraordinary culture and service orientation distinguishes it as one of the few high quality, high organic growth stories in banking.
The big question investors are asking at present is whether the stock market could be dragged down by an increase in bond yields caused by rising inflation pressures. Higher price to earnings multiple ‘growth’ stocks are considered particularly vulnerable to an increase in interest rates, as they reduce the value of their future cash flows. The WCM Quality Global Growth strategy has exposure to several higher multiple stocks. However, it also has meaningful exposure to companies which will benefit from a rebound in economic activity and are less sensitive to an increase in interest rates. Examples of these holdings include: paint and coating manufacturer Sherwin Williams; fluid handling systems firm Graco; and Swedish multinational industrial company Atlas Copco. This exposure to cyclical growth companies is a key element of WCM’s all-weather approach to portfolio construction.