- SGA’s Global Growth portfolio returned -7.0% (gross) and -7.3% (net) in Q4 2016 compared to 1.2% for its primary benchmark the MSCI All Country World Index (ACWI) and -2.3% for the MSCI All Country World Growth Index (ACWI Growth).
- November-December relative underperformance of 6.5% is the worst two-month relative performance period since the inception of the portfolio; underperformance for the quarter constituted a greater than three standard deviation event despite no material change in the portfolio’s superior business quality or forecasted growth.
- U.S. stock indexes hit successive highs following the surprise election of Donald Trump; SGA’s investment approach faced intense headwinds as smaller cap, lower quality, cyclical companies in the Financials, Energy and Industrials sectors outperformed.
- Most of the shortfall during the quarter can be attributed to environmental factors following the election with the balance largely due to disappointments over quarterly reports at Cerner and FleetCor, and investor concern over the impact of Chinese capital controls on AIA.
- Nielsen was added to the portfolio to capitalize on improvements in its media measurement and market research businesses, while LG Household & Health Care was sold due to expectations for weaker Chinese tourist traffic and duty free sales.
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.