October, 2020
Global equality markets were flat in the month as increasing COVID-19 infection rates tempered improving economic conditions. With new COVID-19 shutdowns, Continental Europe lagged. Japan lagged as well while better-than-expected earnings boosted US equities. In this environment, financials and health care outperformed while communication services, consumer staples, and real estate underperformed.
The Global Small Cap Fund increased in absolute terms in the month, beating its benchmark, the MSCI World Small Cap Index. The portfolio benefited from stock selection in materials and real estate, while stock selection in health care and utilities detracted. By geography, stock selection in the Continental Europe and North America helped while it hurt in Asia ex Japan and United Kingdom.
Stelco, a Canadian-listed steel manufacturer, contributed to performance. Higher steel prices and strong deliveries boosted the stock. The company’s under-levered balance sheet and multiple revenue sources continue to appeal to us.
Valmont, a US-listed industrial, also contributed. Valmont reported better-than-expected results, boosted by firming end markets and much improved execution.
Bravura Solutions, an Australian-listed financial software company, detracted. Bravura’s UK-focused business has been hampered by Brexit uncertainty. The company gained a sizeable new contract in the period, but its guidance for the second half of the year concerned investors.
Teamviewer, a German-listed software company, also detracted as Teamviewer’s previous private equity owners exited a portion of their stake.
The portfolio has maintained its position in all four names.
The impact of COVID-19 has been widespread, dramatically impacting US employment numbers and global PMIs. While the US election and issues like OPEC and Russia energy strategy are important risk factors, COVID-19 still outweighs them in our view. In addition, the accommodative actions of central banks in an already levered world demand the attention of investors.
ticker: LAZ0012AU
commentary_block: Array
factsheet_url:
asset_class: Foreign Equity
asset_category: Equity World Mid/Small
peer_benchmark: Foreign Equity - World Mid/Small Index
broad_market_index: Developed -World Index
structure: Managed Fund