Performance Commentary
Global Stocks have bounced back strongly over the past two months after one of the worst December quarters. Most regions and sectors participated in the recovery. Key drivers included a solid corporate earnings reporting season in the United States, a Fed that appears to be more measured in its outlook for interest rates and optimism around a US-China trade deal.
Our Global Quality Equity Fund returned 5.38% in February compared to the benchmark return of 5.21%. our Global Capital Aware Fund (including downside protection) delivered a return of 5.29% after strong contributions from stock selection was marginally offset by a decline in the value of the index ‘puts’ due to a continued sharp market recovery and further falls in volatility.
February Fund Performance
Positive highlights include Intuit, Visa, Estee Lauder, Accenture PLC and Heineken. Detractors were Facebook, Tencent Holdings, Booking Holdings and Wirecard AG. No currency hedging continues across both funds. Insync considers the main risks to the Australian dollar to be on the downside.
Heineken – Beneficiary of global disruption and riding the Africa Megatrend
Being on the right side of disruption is going to be a key driver of generating future investment performance. Many consumer staple companies that have been at the core of quality portfolios are now being disrupted and beer clearly falls into this category. Historically investing in beer companies has been attractive since most beer markets around the world are duopolies or oligopolies.
However, between 2010 and 2017 global beer volumes grew below GDP. Going forward (2018-22), Euromonitor forecast beer volume growth at c30% of GDP which is a significant slowdown. By example, the primary US Market highlights this decline.
Reasons for this collapse include:
- One of the largest demographic shifts in history,
- The emergence of alternative beverage categories like wine, cider and health-oriented drinks
- Tighter regulatory and taxation measures.
Within the beer market, mainstream beer is suffering the most, as consumers are moving rapidly towards other alternatives (like premium and craft beer, spirits, wine and even cannabis). The growth in beer volumes over the next decade is expected to come from select pockets of Africa, Asia and Latin America. Heineken’s exposure to many of these faster growing emerging markets and a greater percentage of sales towards premium beers makes it very well positioned to continue to benefit. With over 60% of operating profits coming from emerging markets, the highest exposure to premium beer and an Owner Managed business model, Heineken is positioned on the right side of global disruption and a major beneficiary of the Africa Megatrend.
Disclaimer
EQT Responsible Entity Services Limited (“EQT”) (ABN 94 101 103 011), AFSL 223271, is the Responsible Entity for the Insync Global Quality Equity Fund and the Insync Global Capital Aware Fund . EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) (“Insync”), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.