Artemis Global Select quarterly review, September 2023

Alex Stanić and Natasha Ebtehadj, managers of the Artemis Global Select Fund, report on the fund over the quarter to 30 September 2023 and their views on the outlook.

Source for all information: Artemis as at 30 September 2023, unless otherwise stated. 

Fund objective

The fund’s objective is to grow capital over a five-year period.

Performance

The fund returned 0.5%, slightly behind the MSCI All Country World index1, which returned 0.6%. That return was, however, ahead of the peer group, the IA’s Global2 sector, where the average return was -0.9%.

For full five-year discrete performance, please see below. Please remember that past performance is not a guide to the future.

The oil price rallied as production cuts by Saudi Arabia and Russia began to affect supplies. In response, share prices of energy companies moved higher and the portfolio’s only holding in the sector, Halliburton, performed well.

Financials were the second-best performing sector. The US Federal Reserve’s Jerome Powell indicated that interest rates would remain 'higher-for-longer', which should support banks' profitability. In the insurance sector, the price for writing new policies remains high given various climate, geopolitical and inflationary risks. The portfolio’s holdings in two large Japanese banks also benefited from higher bond yields in Japan.

On the negative side, our holdings in companies whose share prices are sensitive to higher interest rates – such as technology stocks, utilities and consumer staples companies – fell.

Top contributors to performance were:

  • Japanese banks MUFJ and SMFG
  • Healthcare company Novo Nordisk
  • Oil services company Halliburton

The biggest negatives for performance were:

  • Luxury goods companies LVMH and Richemont
  • Cosmetics company Estée Lauder
  • Sensor and measuring equipment specialist Keyence

Favouring Japan and Europe over the US

We continue to favour Japan and Europe, where we find better value for money than we do in the US. In terms of sectors, we do not have much invested in energy (Baker Hughes is our only holding there) but have a significant level of exposure to healthcare stocks. The drivers for the sector’s long-term growth remain firmly intact and we think valuations here are attractive.

Buying a range of new positions

  • ASML – a long-term beneficiary of demand for semiconductors.
  • CME Group – one of the largest operators of stock exchanges in the world and a beneficiary of greater volatility in bond markets.
  • Haleon – this consumer health business is seeing long-term growth thanks to new products and rising demand from consumers in emerging markets.
  • Meta – the Facebook owner is capturing a larger share of spending on online advertising thanks to its AI-powered ad-targeting algorithm.
  • Ferguson – this US-based distributor of building products has a good record of gaining market share thanks to its geographical coverage and speed of delivery.
  • Aon – this insurance broker is a beneficiary of higher insurance costs.
  • HDFC Bank – continues to take share from India’s state-owned banks, and its recent merger with a mortgage company gives it access to India’s accelerating housing market.
  • Grupo Financiero Banorte – this is the second largest lender in Mexico. As global supply chains shift away from China, Mexico is a key beneficiary and the outlook for manufacturing activity and job creation is healthy.
  • Baker Hughes – this oil field services company also has exposure to natural gas and is delivering compelling improvement in its margins.

We sold these positions

  • IBM – sales of mainframes are slowing and we were concerned about the outlook for its IT consulting business.
  • Hexagon – economic uncertainty is clouding the outlook for a company whose shares were trading on a premium to its peers.
  • Siemens Energy – continued uncertainty around the cost liabilities arising from the acquisition of Gamesa are unlikely to be resolved for some time.
  • Mettler Toledo – demand for Mettler’s weighing and analytical instruments is weakening.
  • Accenture – bookings for consulting projects are slowing.
  • Avery Dennison – there is a risk of a downturn in consumer markets.
  • Richemont – the growing disparity in demand for 'hard' luxury (jewellery, watches) compared to 'soft' luxury (designer clothing, bags) means we now prefer LVMH to Richemont.
  • SMC – automation orders continue to weaken.
  • Omnicom – its results highlighted an uncertain outlook due to project delays and cost cutting by clients in the technology sector.
  • Halliburton – we switched into Baker Hughes (discussed above).

Outlook

We remain focused on identifying resilient businesses with strong balance sheets and low debt. We seek to identify high-quality businesses that are temporarily trading at attractive valuations because of near-term issues (such as HDFC’s merger or the disruption Estee Lauder has seen in China) but where long-term trends remain supportive.

There is great divergence in global economies at the moment, with the US seeing slowing inflation, Europe still dealing with wage inflation, China attempting to recover and Japan changing its policy on interest rates. This divergence is providing opportunities for disciplined global investors. In our view, the opportunities and the valuations outside the US look more attractive, so we continue to favour Japan and Europe over the US.

For now, many market participants expect a ‘soft landing’ in the economy (where growth slows but avoids tipping into outright recession). We are conscious, however, that the full impact of interest rate hikes typically materialises 12-18 months after they take place. Moreover, the massive distortions arising from the pandemic – lockdowns, the related stimulus efforts and their economic consequences – make it harder for economic forecasters to estimate the levels of inflation and interest rates than it would be during a ‘normal’ economic cycle.

1MSCI AC World NR: A widely-used indicator of the performance of global stockmarkets, in which the fund invests. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark. 
2IA Global NR: A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark. 

 

Discrete performance 12 months to 30 September 2023 2022 2021 2020 2019
Artemis Global Select Fund, class I accumulation GBP 5.7% -8.8% 20.2% 11.2% 8.6%
MSCI AC World NR GBP 10.5% -4.2% 22.2% 5.3% 7.3%
IA Global NR 7.5% -8.8% 23.8% 7.4% 5.8%
Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I accumulation units to 30 September 2023. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. Our benchmark index is the MSCI AC World NR.

 

Market volatility risk 

The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events. 

Currency risk 

The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value. 

Concentration risk 

The fund may have investments concentrated in a limited number of holdings. This can be more risky than holding a wider range of investments. 

Emerging markets risk 

Compared to more established economies, investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles, less governed standards or from economic or political instability. Under certain market conditions assets may be difficult to sell. 

ESG risk 

The fund may select, sell or exclude investments based on ESG criteria; this may lead to the fund underperforming the broader market or other funds that do not apply ESG criteria. If sold based on ESG criteria rather than solely on financial considerations, the price obtained might be lower than that which could have been obtained had the sale not been required. 
 

THIS IS A MARKETING COMMUNICATION. BEFORE MAKING ANY FINAL INVESTMENT DECISIONS, REFER TO THE FUND PROSPECTUS, AVAILABLE IN ENGLISH, AND KIID/KID, AVAILABLE IN ENGLISH AND IN YOUR LOCAL LANGUAGE DEPENDING ON LOCAL COUNTRY REGISTRATION, FROM WWW.ARTEMISFUNDS.COM OR WWW.FUNDINFO.COM. 

ARTEMIS DOES NOT PROVIDE INVESTMENT ADVICE ON THE ADVANTAGES OR SUITABILITY OF ITS PRODUCTS AND NO INFORMATION PROVIDED SHOULD BE VIEWED IN THIS WAY. ARTEMIS ONLY PROVIDES INFORMATION ABOUT ITS OWN PRODUCTS AND SERVICES AND DOES NOT ADVISE INVESTORS. SHOULD YOU BE UNSURE ABOUT THE SUITABILITY OF AN INVESTMENT, YOU SHOULD CONSULT A SUITABLY QUALIFIED PROFESSIONAL ADVISER. 

Natasha Ebtehadj

Manages:

‘Global select’, ‘global focus’ and ‘Leading consumer brands’ strategies

Natasha is a fund manager in Artemis‘ ‘global select’ team.

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