October, 2020
The Fund returned -3.23% in October 2020, compared with a return for the Benchmark of -1.13%, with key European markets moving lower as COVID-19 cases in the region soared.
• Most market sectors saw declines in October, including Energy, following a further fall in oil prices, and Information Technology; Utilities and Communication Services moved higher. For the Fund, the largest detractors from relative performance were holdings in Consumer Staples, including British American Tobacco (“BAT”), as well as holdings in Financials; these were partially offset by Materials, owing to the Fund’s sole sector holding Corteva.
• Corteva, a global seed and agrochemical company, was among the top individual contributors to performance in October. The market appears to have reacted positively to the news an activist investor has taken a position in the company, highlighting the margin opportunity available to Corteva. Franchise Partners continue to think the company can significantly improve operating margins, primarily through development and commercialisation of its in-house seed traits pipeline.
• BAT was among the top individual detractors from performance in October. There was no material company specific news, and while US cigarette volumes, as measured by retail scanner data, have deteriorated over the past couple of months, the underperformance of BAT’s shares relative to Altria is difficult to explain. Franchise Partners continues to believe BAT is well-positioned to deliver strong revenue growth over the next few years.
• During the month, Franchise Partners completed the initial purchase of CME Group, one of the leading vertically integrated global financial exchanges and clearing houses. The company holds strong market shares in interest rate, energy, foreign exchange, commodities and metals futures and options markets. Most of these exchange categories are near-monopoly or duopoly market structures.
• Franchise Partners’ investment approach offers several features relevant to the current market environment; in particular, the defining characteristic of companies held by the Fund is their possession of a dominant intangible asset, such as a brand, patent, or intellectual property. Such an asset can place a company in a stronger market position and allow it to weather periods of economic uncertainty.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/160483244.pdfticker: MAQ0404AU
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/mi/lsu6/macquarie-ifp-global-franchise
Providers own factsheet
asset_class: Foreign Equity
asset_category: Large Blend - Fundamental
peer_benchmark: Foreign Equity - Large Fundamental Index
broad_market_index: Developed -World Index
structure: Managed Fund