Price and Performance

Over December, global equity markets suffered continued volatility as labour market and supply chain disruption, and consequent inflation pressure, led to investor concerns around potential tightening of monetary policy and fears of interest rate hikes, resulting in a substantial risk off sentiment amongst investors. The benchmark MSCI All Country World Index (ACWI) returned 1.6% for the month. The Company’s NAV Total Return for December was 1.9%, with Total Shareholder Return lower due to a widening discount at 1.6%, in line with the benchmark.

Over the month, US electronic payments company Visa Inc was the leading contributor to relative performance, held by 5 of the Company’s managers (GQG, SGA, Sands, Metropolis and Vulcan) at an overweight position in the Company’s portfolio and returning 8.9% in a bounce back from the sentiment-led sell-off the stock experienced in November. Visa Inc delivered strong returns as the company experienced a significant boost in consumer spending through the holiday season, with many governments holding off on introducing new COVID-19 restrictions, further boosting consumer confidence. Following November’s sell-off, the Company’s managers owning the stock took the resulting price weakness as an opportunity to add to their positions, with the Company’s position increasing approximately 25% by share volume in November, resulting in the Company being well positioned to benefit from December’s price rally. This is a good example of how the long-term stock owner mindset, driven by fundamental company strength, can capitalise on short-term volatility to add value for investors.

The Company’s NAV further benefitted relative to the benchmark from not holding Tesla, Inc. which delivered a return of -9.8%, as the electric car company suffered from a recall of thousands of vehicles and a shortage of key parts within their supply chain. With regards to regional exposure, the Company benefitted from its overweight position in the UK vs the benchmark, as UK companies (particularly consumer goods and financial services) experienced an uptick in December in the lead up to Christmas.

Detractors from relative performance over December included a number of the Company’s technology names such as Salesforce.com, an American cloud-based software company, and Singapore-based internet company Sea Ltd, both held at significant overweights to benchmark. Tech in general was amongst the weakest sectors in the benchmark in December so it is not entirely surprising to see these names amongst the more significant detractors for the month.

The Company’s target allocations and strategic gearing target of 10% were unchanged over the month.