- The rebound in cyclical stocks moderated in Q2 with growth outperforming at the end of the quarter; business quality metrics were rewarded marginally.
- The portfolio trailed its MSCI All Country World Mid Cap Index benchmark with stock selection detracting from relative returns and sector weights benefiting results.
- Stock selection in the Consumer Discretionary sector accounted for much of the underperformance due to significant weakness in TAL Education and New Oriental Education; selection in Information Technology and Consumer Staples also detracted, while selection in Health Care, Communication Services, and Financials benefited the results.
- A position in Mengniu Dairy was initiated during the quarter, replacing Kansas City Southern. Several other positions were trimmed on strength and others added to on weakness.
- The portfolio is positioned in our highest confidence long-term secular growth opportunities; the portfolio remained overweight Information Technology and Health Care sectors.
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, 0.85%, employing the Global Mid Cap 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 Mid Cap 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.