Price and Performance

For the month of December, the Company’s Total Shareholder Return and NAV Total Return were 2.8% and 1.7% respectively, with the MSCI All Country World Index (ACWI) benchmark returning 2.2%.

Over the month, Baidu was the leading contributor to the portfolio’s performance, delivering an absolute return of 55.2%. As well as benefiting from mobile-app traffic growth supporting a recovery in core marketing and improving monetisation of recent investment, Baidu increased its share buyback program in early December and news also emerged that they may enter the electric vehicle market, where it is anticipated that their artificial intelligence technology will be valuable. Other contributors for the month included Prada, the luxury good business that has recovered strongly this year, and Delivery Hero, a beneficiary of the global pandemic that continues to grow. Alibaba was the main detractor this month as the failure of the planned IPO of spin-off online Finance company Ant Group, as well as the announcement from the Beijing government of an Antitrust probe in to the company, weighed on the firm’s share price. Despite these short-term challenges, Alibaba holds a strong market position in China and is well placed to benefit from long-term growth of domestic consumer spending in the country.

Within the Company’s portfolio, a position was initiated in Compagnie Financière Richemont, a Swiss-based luxury goods company. Through its various subsidiaries, the company produces and sells a broad variety of luxury items such as jewellery and watches and has seen strong growth in several of their brands globally. Elsewhere, the Company’s position in Booking Holdings was reduced, crystallising some of the recent gains in the company’s stock price in the wake of positive vaccine news.

Over December, we have increased the level of gross gearing to be in line with a central target level of 10%, consistent with a more neutral outlook for markets in the medium term.