Insync June 2018 Fund Commentary

August 3, 2018

STRONG PERFORMANCES FOR JUNE & OVER 12 MONTHS

 

The Fund performed strongly again in June at +3.51%, after the cost of protection, and significantly ahead of the benchmark return of 1.81%. Similarly, the 12-month return was also strong, in what has been a volatile year, increasing by 17.25%, after the cost of protection compared to the unprotected benchmark return of 15.00%.

 

 

As discussed in May’s monthly update, disruption across many sectors is occurring at a rapid pace creating winners and losers and posing structural challenges for many investment management styles. Consequently, stock picking has become more important in how industries are likely to feel the impact of accelerated disruption.

 

 

 

 

 

Performance was driven by positive contributions from our holdings in Twenty-First Century Fox, Accenture, Monster Beverage Corp, Cognizant Tech Solutions and Google. The main negative contributors in the month were eBay, Estee Lauder, Booking Holdings and Stryker Corp. 

 

Global Stocks

Global stocks overall rose despite signs of softening economic growth in Europe and Japan, a worsening in trade relations, more of Trumps unpredictability and rising interest rates in the US. The strengthening US dollar also weighed on emerging markets currencies, which contributed to EM equities continuing to sell off after outperforming earlier in the year. Within the major markets, the US was a stronger performer benefitting from tax cuts driving profit-growth. Energy led the way on rising oil prices, while financials were the weakest, due in part to tightening financial conditions and flattening in the US yield curve.

 

The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside. Insync continues to utilise index put options to buffer sharp deep falls in equity markets.

 

Quality Never Goes Out Of Style

Pleasingly fund numbers to the end of financial year across most time periods long and short have delivered a solid result for investors.  This is not only against the broad market but also in comparison to many of its peers that advisers have historically placed client monies with. Our rare ‘Quality’ investment style with protection, focused on ROIC and megatrends® keeps pace with accelerating disruption providing a strongly correlated addition to investor portfolios.  

A Megatrend® profile: Omni-channel Payments

 

This month we examine one of the highly promising sub-trends of the move to a cashless society Insync invests within. Whilst this is a well understood global megatrend® with a significant runway of growth ahead, the use of digital payments for goods and services is still in the earlier stages of evolution. This embraces both online payments and in-store payments using smart devices. Within this the mobile device share of e-commerce transactions is accelerating.

 

 

 

Today’s consumers are becoming increasingly connected embracing tablets, smartphones, wearables, messenger apps and social media. This connectivity is significantly impacting their shopping experience. People are starting to purchase anywhere, at any time, from any device, from any channel, and using any payment means of their choice. Mobile devices and the Internet are seen as game changers for the payments industry and for retailers. The number of connected devices on the so-called Internet of Things will continue to explode, hence our interest!

 

Examples of this you may be personally utilising today include:

  • In-store mobile device usage to look up product and pricing information, purchase and payment in-outlet

  • Look up prices in online shops and, in some cases, approach the merchant for a better price

  • Purchase at a different online merchant, if the price in retail outlet is not competitive or the product not available

  • Self-checkout or in-cart checkout – combined with automatic payment

  • Online purchase in online shops – while being at home, in-store or away from home

  • In-app purchase and payments using QR-codes to bridge from posters to the merchant’s online shop

  • Click & Collect – online purchase with delivery and payment in outlet or by postal service

Even more, consumers demand to be able to use new types of payment. Examples include:

  • In-store payments with mobile devices

  • In-app payments directly from the bank account

  • Mobile payments on cards and/or on digital wallets (MasterPass, Visa Checkout, PayPal)

  • Payments with messenger apps (e.g. Alipay, WeChat App), initiated by QR-code or 1D-barcode

  • Online buy-buttons with one-click payments (e.g. Facebook, Google, Amazon)

  • Online payments on cards, from bank accounts, or using messenger apps (e.g. Alipay, WeChat App)

 

As connected consumers shop using more and more touch points and checkout channels, it has become more difficult for the individual merchant to analyse the consumers’ purchase and payment patterns at an individual level in order to understand how to improve their respective sales strategy accordingly. It is about creating a seamless customer dialogue through every stage of the customer journey, from pre-purchase research and showrooming to post-sales touch points. Retailers are expected to be able to offer the answer to this new consumer behaviour pattern and deliver seamless ‘omni-channel’ consumer experiences.

 

Insync have a position in a leading European infrastructure company that facilitates merchants to seamlessly integrate the POS (point of sale) transaction with mobile and Internet transaction at the same time. The company is a beneficiary of the collision of digital payments and Omni-shopping megatrends®.  It meets the two key hurdles Insync seek for consistently across their portfolio of investments which is the long run way of growth supported by global megatrends® and high returns on invested capital.

 

New fund from next month

From July a new fund option will be available. Basically, this is the same fund as our current Global Titans Fund minus the put-option protection. Thus, its ongoing expenses are also less.

 

Name changes

The Insync Global Titans Fund has been renamed to the Insync Global Capital Aware Fund. The new unprotected fund mentioned above is called the Insync Global Quality Equity Fund.

 

 

 

 

 

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