- The portfolio returned +0.7% (gross) and +0.5% (net) in Q4 and +9.9% (gross) and +8.9% (net) in 2021 despite 30%+ earnings growth by the underlying portfolio companies. Over the last 3, 5, 7 and 10 years the approach has generated strong absolute and relative returns with a lower level of risk.
- The portfolio underperformed its MSCI All Country World Index (ACWI) benchmark in Q4 due mainly to stock selection in the Information Technology and Financials sectors where select payment and software stocks were impacted by short-term disappointments; a lack of exposure to semiconductors also hurt.
- For 2021, the portfolio trailed its benchmark due largely to major adverse changes in Chinese regulatory policies and the outperformance of high beta economically sensitive stocks which benefited from a steep but unsustainable rise in earnings expectations as the global economy emerged from the COVID-19 pandemic. Such periods of cyclical strength have historically posed a headwind for our approach but have also been followed by periods of outperformance as market earnings growth moderates and our portfolio companies’ growth remains more stable.
- New positions in Danaher and Icon were initiated and the portfolio’s positions in Nike and Abbott were liquidated due to valuation and a desire to reallocate the capital to other higher expected return opportunities; several other positions were trimmed or added to.
- Co-founder, Portfolio Manager and Analyst Gordon Marchand has announced that he will retire from the firm at the end of Q2 2023 as he turns 68 years old. Gordon will relinquish his portfolio management responsibilities to Kishore Rao who will join Rob Rohn and HK Gupta on the Global Portfolio Management Team effective July 1, 2022. Further details regarding the change are provided at the end of this commentary.
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 GIPS Report 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, 0.85%, 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. The largest contributors and detractors are determined using a ranking of the absolute contribution to portfolio return by each security held over the period under consideration. 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 investments, calculating performance, and preparing GIPS Reports are available upon request. SGA’s earnings growth forecast data is based upon portfolio companies’ Non-GAAP operating earning.