- SGA’s Global Growth portfolio returned 3.4% (gross) and 3.1% (net) in Q2 2018 compared to 0.5% for its primary benchmark the MSCI All Country World Index (ACWI), and 2.3% for the ACWI Growth Index; On the year-to-date the portfolio has returned 6.6% (gross) and 6.1% (net) compared to -0.4% for the MSCI ACWI and 3.0% for the MSCI ACWI Growth Index
- Higher U.S. interest rates and significant repatriation of funds by corporations due to tax law changes continued to push the U.S. dollar higher and emerging market currencies fell; volatility subsided in May and early June before rebounding late in the quarter; we continue to expect increases in market volatility over the course of 2018-19
- U.S. markets outperformed most developed and emerging markets despite Q1 U.S. GDP growth being revised downward; China’s Shanghai Index plunged over prospects of a trade war with the U.S.; European economic growth showed signs of decelerating while nationalists assumed power in Italy and markets particularly in Europe and Latin America faced selling pressure
- As in Q1, smaller-cap growth companies performed best; the return to business quality was mixed and varied significantly over the course of the quarter; higher beta low return on equity companies and those with no earnings performed best, but those with low debt also outperformed
- The Energy, Technology and Consumer Discretionary sectors performed best with Energy leading by a wide margin as oil prices rose on potential supply concerns; Financials, Telecommunications, Industrials and Consumer Staples all generated negative returns
- The portfolio’s position in Core Labs was sold with the proceeds in part going to fund an increase to the target weight in the portfolio’s other investment in the oil services industry, Schlumberger; other positions were trimmed or added to consistent with our valuation discipline and focus on reallocating capital from strongly performing stocks to those with more attractive 3-5 year opportunities
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.