- The portfolio depreciated in value during the quarter but generated strong relative returns as markets experienced significant volatility and weakness due to the global spread of the COVID-19 virus.
- Market volatility rose to historic levels a month after markets hit new highs; the increased volatility created opportunities for our approach to growth investing, consistent with the return pattern we have experienced over time.
- Stock selection and sector weights each contributed positively to portfolio outperformance; selection in the Health Care and Consumer Discretionary sectors contributed most while the portfolio’s lack of exposure to Energy, underweight to Financials and overweight to Information Technology also benefited returns.
- Portfolio activity increased during the period, as we have seen in other periods of increased volatility, with new positions being initiated in Dassault Systémes, Intuitive Surgical and PayPal, and existing positions being sold in Mondelez and Danone due to forced attrition; many other positions were trimmed and added to as we sought to take advantage of wide fluctuations in stock prices.
- With a gradual and staggered economic recovery expected across the world, we strongly believe that the superior business quality of our companies (better pricing power, recurring revenues, more predictable earnings growth, strong cash flow generation, and solid management teams) will be rewarded by wary investors in the years ahead.
The opinions expressed herein reflect the opinions of Sustainable Growth Advisers, LP and are subject to change without notice. Past performance is no guarantee for future results. This information is supplemental and complements a full disclosure presentation that can be found with composite performance. The securities referenced in the article are not a solicitation or recommendation to buy, sell or hold securities. This commentary is provided only for qualified and sophisticated institutional investors.
Results are presented gross and net of management fees and include the reinvestment of all income. The Net Returns are calculated based upon the highest published fees. The net performance has been reduced by the amount of the highest published fee that may be charged to SGA clients, 0.90%, employing the Global Growth equity strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. Upon request, free of charge, SGA can provide a list of all portfolio holdings held in SGA’s Global Growth portfolio for the year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. SGA’s earnings growth forecast data is based upon portfolio companies’ Non-GAAP operating earnings.