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Monthly Fund Commentary, September 2019

Please find below a summary of performance, activity and outlook from September 2019 from our fund managers.

Jonathan Pines Portfolio Manager

Market and Performance review

The MSCI All Countries Asia ex Japan Index returned 1.72% in US Dollar terms in September. The Fund underperformed the benchmark on a relative basis over the month. The underperformance resulted primarily from our stock selection, notably in China, eclipsing gains from our country allocations.

PowerTech Technology, a Taiwan memory testing/packaging company, rose as a result of potential upside to profitability with increased capacity for its logic-IC and NAND testing business for Chinese smartphone manufacturers, and gradual earnings improvement as customer inventory is digested. KB Financial, a Korean bank, rose as earnings are expected to remain resilient despite falling interest rates due to strong loan growth and benign credit costs. The bank stands out as an attractive yield play, especially at current valuations, good earnings visibility and no major asset quality risk. Non exposure to AIA, the Hong Kong-listed insurer, benefited as its new business growth in Hong Kong is expected to be impacted near-term by prolonged social unrest that’s deterring mainland visitors’ purchases.

Wuliangye Yibin, a Chinese liquor maker, detracted the most from relative returns. Investors took profits after the strong performance year to date which has seen shares rise more than 150%. Sinopharm, a Chinese pharmaceutical distributor, fell on concerns and uncertainty surrounding an industry-wide price cut on drugs. Cosco Shipping Ports, a Chinese port operator, fell amid investor fears that an escalation is US-China trade tensions could impair the throughput growth outlook, and amid poor capital allocation decisions by a price insensitive management team.

Outlook

Smaller and Value stocks in Asia ex Japan have now underperformed substantially for several years. There is compelling value in the Fund (perhaps the most compelling in the Fund’s history). An elevated dividend yield for the Fund as a whole in the context of perhaps record low risk free interest rates we believe implies high potential for strong absolute performance.

Gary Greenberg, Portfolio Manager

Market and Performance Review

The benchmark MSCI Emerging Markets Index returned 1.91% in September. Markets rose as trade negotiations showed more positive signals after President Trump delayed a tariff increase that had been scheduled for October 1st, and after the US Federal Reserve cut interest rates. Geopolitical tensions rose in the Middle East, where Saudi Arabian oil facilities were attacked, sending the oil price 15% higher on supply concerns. China’s economy continued to slow, industrial production growing at 4.4%, down from around 7% at the start of 2018, reinforcing the need for more policy measures to support domestic activity and offset weaker external demand.

The Fund outperformed the benchmark index in relative terms over the period. Stock selection in India, the United Arab Emirates and South Africa contributed the most to relative returns, helping offset the negative impact from selected names in Taiwan and Brazil which detracted.

Nari Technology, a leading provider for power and automation technologies in China, rose on expectations for an acceleration of grid investment in the second half of 2019 and sustainable growth in secondary/grid automation equipment demand. Samsung Electronics, the Korean electronic equipment manufacturer, rose due to earnings improvement from mobile and display and a positive read-across from competitor Micron’s better-than-expected quarterly results which point to a bottoming in the memory cycle. Taiwan Semiconductor rose as management guided for a better-than-expected Q3 2019 and highlighted that 5G rollouts are accelerating, offering strong visibility into 2020.

Delta Electronics, a Taiwanese manufacturer of power supplies, underperformed due to weakness in the PC and notebook market and industrial automation (IA) recovery has been slower than expected. Bank Rakyat Indonesia fell amid concern state-owned banks will be pressured by the government to support weaker financial institutions in the country. Baozun, a Chinese e-commerce solutions provider, fell post results due to growing concern over market maturity and the potential churn of large brands.

Outlook

Emerging Markets are trading at a moderate discount on price earnings and significant 30%+ discount on price book relative to Developed, despite enjoying a similar level of profitability. Globally, central banks are in an easing cycle led by the Federal Reserve, and bond yields are likely to remain lower for longer. Global Purchasing Managers' Index (PMI) data already points to a manufacturing recession. The team expects the services sector will follow suit, employment levels will start to fall in the US, and any monetary response to be insufficient for a global rebound. They anticipate a consensus to form around the need for a spending boost, starting in Europe, spreading to the US and from there to Emerging Markets, over the next 18 months.

Few markets in Emerging Markets have major macro vulnerabilities this time, unlike in 2013, and most markets offer positive interest rates after adjusting for inflation. This backdrop of slower economic growth, a wide valuation discount, and lower yields are particularly beneficial for asset prices in economies that can grow despite global headwinds like trade wars. The team remains focused on several attractive secular themes, such as the rollout of 5G, digitisation, logistics, premiumisation, and demand for health care and financial services remain in place and the sell-off offers opportunities to buy into them at attractive valuations.

Gary Greenberg, Portfolio Manager

Market and Performance review

The benchmark MSCI Emerging Markets SMID Net Total Return Index returned 1.53% in US Dollar terms in September. Markets rose as trade negotiations showed more positive signals after President Trump delayed a tariff increase that had been scheduled for October 1st, and after the US Federal Reserve cut interest rates. Geopolitical tensions rose in the Middle East, where Saudi Arabian oil facilities were attacked, sending the oil price 15% higher on supply concerns. China’s economy continued to slow, with industrial production growing at 4.4%, down from around 7% at the start of 2018, reinforcing the need for more policy measures to support domestic activity and offset weaker external demand.

The Fund underperformed the benchmark index in relative terms over the month. Stock selection in Taiwan detracted the most, offsetting the positive impact from selected names in the United Arab Emirates and India.

Nari Technology, a leading provider for power and automation technologies in China, rose on expectations for an acceleration of grid investment in the second half of 2019 and sustainable growth in secondary/grid automation equipment demand. Shares in NMC Healthcare, an integrated, private healthcare operator in the Middle East and Europe, rose after a strong set of first-half 2019 results. While the stock has been heavily shorted, we view bear arguments as lacking merit in view of the company’s results. NMC executed well on cash conversion and organic growth and a partial removal of pledged stock by strategic shareholders. Mavi, a fast-fashion apparel retailer in Turkey, rose as the company delivered strong quarterly results driven by solid growth in both domestic and international sales.

Sinbon Electronics, a cable-assembly and connector-trading solutions provider based in Taiwan, fell the most after the stock was subject to profit-taking following a strong performance year-to-date. Sales and earnings growth momentum is expected to trend down in the Q4 from the previous quarter on seasonal weakness, in-line with normal seasonality. Delta Electronics, a Taiwanese manufacturer of power supplies, underperformed due to weakness in the PC and notebook market and industrial automation recovery has been slower than expected. Baozun, a Chinese e-commerce solutions provider, fell post the results due to growing concern over market maturity and the potential churn of large brands.

Outlook

Currently, Emerging Markets are trading at a moderate discount on price-to-earnings and a significant 30%+ discount on price-to-book relative to Developed markets, despite enjoying a similar level of profitability. Globally, central banks are in an easing cycle led by the Federal Reserve, and bond yields are likely to remain lower for longer. Global Purchasing Managers' Index (PMI) data already points to a manufacturing recession. We expect the services sector will follow suit, employment levels will start to fall in the U.S., and any monetary response to be insufficient for a global rebound. We anticipate a consensus to form around the need for a spending boost, starting in Europe, spreading to the U.S. and from there to Emerging Markets, over the next 18 months.

Few countries within Emerging Markets have major macro vulnerabilities at this time, unlike in 2013, and most markets offer positive interest rates after adjusting for inflation. This backdrop of slower economic growth, a wide valuation discount, and lower yields are particularly beneficial for asset prices in economies that can grow despite global headwinds like trade wars. We remain focused on several attractive secular themes, such as the rollout of 5G, digitisation, logistics, premiumisation, and demand for Health Care and Financial Services remain in place and the sell-off offers opportunities to buy into them at attractive valuations.

Geir Lode, Portfolio Manager

Market and Performance Review

With concerns building that the performance differential between Growth and Value had widened too far, there was a sudden change in market leadership in September. Investors flocked towards Value and this coincided with our risk aversion indicator swinging from 'risk-off' to 'risk-on' almost overnight as cyclicals started to outperform. The Alpha Model reflected this environment as Valuation factors bounced back sharply across sectors, at the expense of companies with positive Growth and Sentiment characteristics. The factor returns suggest almost a “junk rally” in which the market was led by cheap companies with lower growth and worse quality than peers, favoured purely for their low multiples. Companies previously preferred for their revenue growth traded particularly poorly. Against this backdrop the MSCI World Index returned 2.13%.

The Fund underperformed the benchmark index in September. From a sector viewpoint, the contribution from selection in Energy was outweighed by detractions from selection in Health Care, Utilities and Industrials. From a regional perspective, the underperformance was driven primarily by selection in North America.

Marathon Petroleum, ASML Holding and Dollar Tree were the largest contributors to relative returns. Marathon Petroleum increased due to the rotation towards cyclicals and, alter in the month, renewed calls from activist investor, Elliott Management, to break-up the company. ASML increased after Aalberts, who make parts for ASML, said they were very positive for their business with ASML in Q4 2019 and 2020. The stock also benefited from the rotation towards cyclical areas of the market. Dollar Tree reported consensus beating earnings at the end of August, driven by strong same store sales at Family Dollar. The company also raised FY2019 guidance.

The largest individual detractors were Essity, Walt Disney and American Tower. Essity fell on concerns that lower pulp prices would adversely affect revenues in 2020. Walt Disney and American Tower were victims of the rotation as high quality, growth companies underperformed in September.

Outlook

Since the financial crisis in 2008, Growth has consistently outperformed Value. This outperformance has accelerated since 2017, to the extent that Growth is now more expensive than at any time since the Tech Bubble at the turn of the century, even allowing for September’s Value rally. Global economic indicators have started to worsen, exacerbated by the US-China trade tensions, Brexit uncertainty, Middle East tensions, protests in Hong Kong and numerous other geopolitical risks and flashpoints. This backdrop has polarised investor sentiment and prompted sharp swings in risk appetite, which may be a signal that the drivers of the current bull market are becoming less sustainable. A market inflection is likely to normalise the relative valuation between Growth and Value.

However, as growth rates decline, the likelihood of lower interest rates increases, with some equity investors welcoming weak economic news in the hope that this will prompt central banks to cut rates further, propelling markets and Growth even higher. As such, predicting when the Growth rally is likely to end is extremely difficult. For the moment, the worsening economic backdrop and the lower-for-longer rate environment is holding sway. There has been a modest increase in the Fund’s exposure towards larger, more defensive names in recent months, however we remain cognisant of the valuation of the companies in which we invest, believing that while markets are currently ambivalent towards the price of growth this phenomenon cannot continue indefinitely.

Hamish Galpin, Portfolio Manager

Market and Performance review

The MSCI World Index returned 2.06% in US Dollar term in September. The Fund outperformed the benchmark on a relative basis over the period.

Kirby Corp was the largest contributor. It rose sharply at the beginning of the month as investors rotated towards more cyclical areas of the market in the US. Horiba increased on little specific news, but its exposure to automotive testing and semiconductor industries provided a tailwind as investors preferred more cyclical areas of the market in September. Brunswick Corp increased after its management expressed their confidence that it would meet its 2020 earnings forecasts.

The largest detractor was Evolution Mining, the precious metal miner, which fell due to its perceived defensive qualities. SSP Group decreased after reporting softening Q4 sales that raised concerns that guidance, which management left unchanged, may have to be reduced. Steris Plc fell alongside the Health Care sector as investor sentiment shifted away from more defensive, quality growth companies.

Outlook

Declining economic growth has been a recent concern for the market, exacerbated by the tariff dispute. We remain of the view that we are in a structurally low growth environment (and a flat yield curve one), which may mean occasional “recessions” in key markets, as defined by two quarters of negative GDP. This does not mean, however, that a material recession is imminent despite the longevity of the current economic expansion. Altogether, this is a favourable backdrop for active managers searching for price anomalies (and by contrast, a less favourable one for index-driven ETFs).

James Rutherford, Portfolio Manager

Market and Performance Review

European Equity markets posted strong gains in September with the FTSE All-World Europe index returning 3.81%. The Fund underperformed, as contributions from our underweight position and stock selection in Consumer Goods were outweighed by detractions from selection in Health Care and Industrials.

Valeo, ASML and Deutsche Boerse were the largest contributors from the stocks we held, while the fact that we did not own Nestle also had a significant positive impact. Valeo benefited from the rotation towards cyclical value stocks at the start of September. ASML rose after its parts maker, Aalberts, issued a positive forecast for the firms’ joint operations in Q4 2019 and 2020. Deutsche Boerse’s price increased ahead of its inclusion in the Euro Stoxx 50 index in early September.

The largest individual detractors were Lonza Group, Qiagen and Fidelity National Information Services. Lonza Group reiterated its 2022 targets but declined alongside Qiagen and the broader Health Care sector due to the rotation away from high-quality growth names. Fidelity National Information Services, formerly known as Worldpay, also fell victim to the rotation following a period of strong performance.

There was no trading activity during the period.

Outlook

We have discussed before the potential for a sharp rotation between Growth and Value. This was apparent in early September, although only partially. Growth-stock valuations are at premiums not seen in the last decade, but if we look back further there have been periods in the late 1990s and the early 1970s (the “nifty fifty” era) when valuations were even more extreme: Having said that, the potential for a value rally is still there.

For many value stocks, earnings growth on a Year-on-Year basis should start to improve as we enter the final quarter. However, in light of some of the mixed manufacturing (and even services) data, it may well take more than just easier Year-on-Year comparisons. It is likely that a meaningful and sustained shift from Growth to Value will require a clear catalyst, in the form of a settled US-China trade dispute, a coordinated increase in fiscal spending, a shift in the yield curve or agreement on the interminable Brexit question. None of these seem likely today, but that could change quickly and given the very bearish sentiment any rotation could be significant.

Mark Sherlock, Portfolio Manager

Market and Performance Review

The Russell 2500 Index rose 1.77% in US Dollar terms in September. US Equity markets rose in September after trade war concerns eased and the US Federal Reserve cut interest rates for only a second time since 2008 in the face of mixed economic data. While the economy continued to add jobs, the pace of growth of aggregate hours worked in the economy has slowed meaningfully. Consumer confidence also declined from elevated levels. Interest rates were reduced globally in several countries, including Brazil and Russia, and the European Central Bank (ECB) announced a new stimulus package. US financial markets observed a major rotation as investors signalled a preference for value stocks over growth companies, and optimism resurfaced after President Trump delayed a tariff increase that had been scheduled for October 1st. Energy stocks rose as Saudi Arabian oil facilities were attacked, sending the oil price 15% higher on supply concerns.

The Fund outperformed the benchmark index on a relative basis over the month. Outperformance was driven by stock selection, notably in Technology and Consumer Discretionary.

LKQ, a manufacturer of recycled and generic car parts, contributed the most after an activist Hedge Fund acquired a substantial stake in the auto parts company. Teradyne, an automated test and industrial automation equipment provider, moved higher after investors became more positive as semiconductor stocks benefited from tariff postponement. Kirby Corp, an inland and coastal barge operator, rose given expectations a spike in the oil price could help their oil service business.

Cantel Medical Corp, a high-quality business with a dominant position in Endoscopy in the US, fell on concerns that the divestment of their lower margin water filtration business could take longer than expected. Steris (medical equipment sterilisation) fell due to profit taking post strong results in July. LivaNova (medical technology) moved lower after an earlier rally on positive news on the structure of the clinical trial for VNS (Vagus Nerve Stimulation), which treats depression.

Outlook

The overall market appears reasonably priced, but in certain areas we are seeing pockets of overvaluation, with individual stock prices decoupling from fundamentals. However, we are still finding value in many parts of the market and remain focused on investing in high-quality companies that should benefit if the market moves higher but protect investors’ capital during any pullback.

Lewis Grant, Portfolio Manager

Market and Performance Review

With concerns building that the performance differential between Growth and Value had widened too far, there was a sudden change in market leadership in September. Investors flocked towards Value and this coincided with our risk aversion indicator swinging from 'risk-on' to 'risk-off' almost overnight as cyclicals started to outperform. The Alpha Model reflected this environment as Valuation factors bounced back sharply across sectors, at the expense of companies with positive Growth and Sentiment characteristics. The factor returns suggest almost a “junk rally” in which the market was led by cheap companies with lower growth and worse quality than peers, favoured purely for their low multiples. Companies previously preferred for their revenue growth traded particularly poorly. Against this backdrop, the MSCI All Country World Index returned 2.10% (in US Dollar terms).

The environment proved difficult for our investment approach and the Fund underperformed the benchmark index in September, driven by stock selection. From a sector viewpoint, there was a contribution from Materials, which was more than offset by a detraction from Utilities and several other modest detractions. From a regional perspective, the underperformance was driven primarily by selection in North America.

ASML, Prudential Financial and M&T Bank were the largest contributors to relative returns. ASML increased after Aalberts, who make parts for ASML, said they were very positive for their business with ASML in Q4 2019 and 2020. The stock also benefited from the rotation towards cyclical areas of the market. Prudential Financial and M&T Bank both increased alongside the US Financials sector as investors rotated towards cyclicals. In addition, Prudential Financial announced the acquisition of Assurance IQ, a datascience platform to sell health and financial wellness solutions; a key strategy for the company.

The largest detractors were Walt Disney, Essity and Lonza Group. Walt Disney was a victim of the rotation as high quality, growth companies underperformed in September. Essity fell on concerns that lower pulp prices would adversely affect revenues in 2020. Lonza Group reiterated its 2022 targets, but declined due to the rotation towards Value.

Outlook

Since the financial crisis in 2008, Growth has consistently outperformed Value. This outperformance has accelerated since 2017, to the extent that Growth is now more expensive than at any time since the Tech Bubble at the turn of the century, even allowing for September’s Value rally. Global economic indicators have started to worsen, exacerbated by the US-China trade tensions, Brexit uncertainty, Middle East tensions, protests in Hong Kong and numerous other geopolitical risks and flashpoints. This backdrop has polarised investor sentiment and prompted sharp swings in risk appetite, which may be a signal that the drivers of the current bull market are becoming less sustainable. A market inflection is likely to normalise the relative valuation between Growth and Value.

However, as growth rates decline, the likelihood of lower interest rates increases, with some equity investors welcoming weak economic news in the hope that this will prompt central banks to cut rates further, propelling markets – and Growth – even higher. As such, predicting when the Growth rally is likely to end is extremely difficult. For the moment, the worsening economic backdrop and the lower-for-longer rate environment is holding sway. There has been a modest increase in the Fund’s exposure towards larger, more defensive names in recent months. However, we remain cognisant of the valuation of the companies in which we invest, believing that while markets are currently ambivalent towards the price of growth this phenomenon cannot continue indefinitely.

Tim Crockford, Portfolio Manager

Market and Performance Review

European equity markets posted strong gains in September with the FTSE World Europe ex UK index returning 3.25%. The Fund outperformed, as contributions from selection in Consumer Goods and Technology alongside a positive impact from our underweight in Consumer Goods and overweight in Oil & Gas outweighed detractions from selection in Basic Materials and Health care and our underweight in Financials.

Umicore, Hella and ASML were the largest contributors from the stocks we held, while the fact that we didn’t own Nestle also had a significant positive impact. Umicore benefited from the rotation towards cyclical value and was given a further boost after signing a long-term agreement to supply cathode materials to LG Chem. Hella also benefited from the rotation. It also reported earnings ahead of expectations and maintained guidance. ASML rose after its parts-maker Aalberts issued a positive forecast for the firms’ joint operations in Q4 2019 and 2020.

The largest individual detractors to our performance were Barrick Gold, Ubisoft and Sartorius. Barrick Gold announced that it was well-positioned to achieve its targets for the year, but fell as investors moved away from defensive assets. Ubisoft fell after issuing a convertible bond for up to €500m and on rumours that its latest ’Ghost Recon: Breakpoint’ game release was getting bad reviews from testers. Sartorius, having performed strongly since the turn of the year was also a victim of the rotation from Growth to Value.

Outlook

We have discussed before the potential for a sharp rotation between Growth and Value. This was apparent in early September, although only partially. Growth-stock valuations are at premiums not seen in the last decade, but if we look back further there have been periods in the late 1990s and the early 1970s (the nifty fifty era) when valuations were even more extreme. Having said that, the potential for a Value rally is still there.

For many Value stocks, earnings growth on a year-on-year basis should start to improve as we enter the final quarter. However in light of some of the mixed manufacturing (and even services) data, it may well take more than just easier year-on-year comparisons. It is likely that a meaningful and sustained shift from Growth to Value will require a clear catalyst, in the form of a settled USChina trade dispute, a co-ordinated increase in fiscal spending, a shift in the yield curve or agreement on the interminable Brexit question. None of these seem likely today, but the odds are shifting, and could change quickly as we approach the conclusion of talks between the various parties involved. Given the very bearish sentiment any rotation could be significant.

Our ideas generation isn’t driven by a consideration of style characteristics, but from a portfolio perspective we are aware of the valuation dichotomy. Whether we see a sustained style rotation or not, there is a balance within the portfolio and over the long-term it is the bottom-up fundamentals that will win.

Tim Crockford, Portfolio Manager

Market and Performance review

Fears that the performance differential between defensive growth companies and the more cyclical areas of the market had widened too far led to a sharp sentiment shift in favour of Value in September. Against this backdrop the MSCI All-Country World IMI Index returned 2.10%. The Fund outperformed in the month driven by stock selection but tempered by sector allocation. The largest contributions came from selection in Consumer Discretionary, Information Technology and Health Care, which were partially offset by detractions from our overweight in Health Care and selection in Financials and Industrials.

On an individual stock basis, Emergent BioSolutions, Umicore and Horiba were the largest contributors. Emergent BioSolutions announced that it had been awarded a 10-year contract by the US Department of Health & Human Services valued at approximately $2bn over 10 years. Umicore benefited from the rotation towards cyclical value and was given a further boost after signing a long-term agreement to supply cathode materials to LG Chem. Horiba also benefited from the rotation towards cyclical value.

On the negative side Sartorius, Qiagen and Lonza Group detracted the most. Sartorius, having performed strongly since the turn of the year was a victim of the rotation from growth to value. Qiagen reported results in line with expectations at the end of July, but fell after it cut guidance for 2019 due to lower sales from its next-generation gene-sequencing partnership in China. Lonza Group reiterated its 2022 targets, but declined due to the rotation away from high quality growth names.

Outlook

A sharp rotation out of Growth in favour of Value at the start of September highlighted one of investors’ biggest concerns currently; the overstretched valuation of defensive growth stocks. For the time being, the correction has fizzled out, but easier year-on-year earnings comparisons lead many to believe that the rotation could resume in Q4. This is far from a foregone conclusion as growth remains subdued and interest rates remain low, which could continue to support the Growth factor. Our SDG taxonomy, thematic-driven approach has led to a portfolio of investments in companies that have different characteristics, with a blend of both Growth, Value, cyclical and defensive names. These are companies that we believe will benefit from the emerging growth opportunities arising from countries need to meet the 2030 Sustainable Development Goals, which should ultimately generate shareholder value over the longer-term, as positive change has a positive effect on their future through-the-cycle earnings. We believe this will help the Fund achieve positive relative returns over time, regardless of the prevailing style preferences or the macroeconomic backdrop.

Hamish Galpin, Portfolio Manager

Market and Performance review

The MSCI All Country World SMID Cap Index benchmark returned 2.16% in September. SMID Developed Markets continued to outperform Emerging SMID Markets, returning 2.0% compared to 1.4% (in US Dollar terms). Developed SMID stocks, however, outperformed their Large Cap peers, returning 2.0% and 1.9% respectively. In the US, Small Caps outperformed Large Cap with the Russell 2000 (Small Cap index), returning 1.9%, outperforming the S&P500, which returned 1.7% and the Russell 2500, which returned 1.6%.

The Fund outperformed the benchmark index return in September. Stock selection contributed the most to relative returns, helping offset the negative impact from sector allocation and currency effect which detracted.

Brunswick, Kirby and Horiba were the largest contributors in September. Brunswick increased after its management expressed their confidence that it would meet its 2020 earnings forecasts. Kirby rose sharply at the beginning of the month as investors rotated towards more cyclical areas of the market in the US. Horiba increased on little specific news, but its exposure to automotive testing and semiconductor industries provided a tailwind as investors preferred more cyclical areas of the market in September.

The largest detractors were Steris, SSP Group and AptarGroup. Steris fell alongside the Health Care sector as investor sentiment shifted away from more defensive, quality growth companies underperform. There was no specific news on the company. SSP Group decreased after reporting softening Q4 sales that raised concerns that guidance, which management left unchanged, may have to be reduced. AptarGroup, which makes dispensing systems for pharmaceutical, cosmetics and personal care products fell alongside defensive growth areas of the market.

Outlook

Declining economic growth has been a recent concern for the market, exacerbated by the tariff dispute. We remain of the view that we are in a structurally low growth environment (and a flat yield curve one), which may mean occasional “recessions” in key markets, as defined by two quarters of negative GDP. This does not mean, however, that a material recession is imminent despite the longevity of the current economic expansion. Altogether, this is a favourable backdrop for active managers searching for price anomalies (and by contrast, a less favourable one for index-driven ETFs).

Fund performance returns are in base currency of the Fund and are calculated at close of business, gross of management fees. Fund performance returns at a Share Class level are calculated at midday and are net of management fees. Share Class performance returns can be found on the relevant factsheet. Source: Northern Trust.

The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other Hermes communications, strategies or products.

Past performance is not a reliable indicator of future performance. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. It should be noted that any investments overseas may be affected by currency exchange rates.


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