In 2021, the Strategic Europe Quality Fund returned 22.50%, broadly in line with the MSCI Europe at +25.13%. Sector allocation was the main drag on performance for the year due to the Fund’s relative overweight in Consumer Staples.
Stock Selection, on the other hand, was positive. The top contributors to performance were Novo Nordisk, Nestlé, Wolters Kluwer and AstraZeneca and the top detractors were JDE Peet’s, S4 Capital, MTU and Smith & Nephew.
As previously mentioned, Phileas Asset Management took on the role of Fund manager from Lofoten Asset Management on 1st November 2021.
In December, the Strategic Europe Quality Fund returned 4.99% compared to 5.52% for the MSCI Europe. Sector Allocation was neutral while the stock selection was down by 43 bps.
Compass Group had a good month; the company’s management is optimistic regarding the prospects for new business. The COVID crisis is accelerating the need for subcontracting in the catering industry, as health constraints make managing a canteen more complex.
First time outsourcing has never been so dynamic. As such, we believe that Compass’ growth could be surprisingly good – all other things being equal – in the coming quarters.
Saint-Gobain and Schneider also performed well. Both companies are well-positioned in the global decarbonisation effort. Exposed to green stimulus budgets, they benefit from favourable short, medium and long-term operating trends.
Stocks such as Kingspan, Puma, Richemont and Pandora rose, but less than the market, following their good performance this year. We remain confident in the growth potential of these companies.
Following a good run in 2021, we remain optimistic for Richemont’s upside potential. After several years of repositioning under the leadership of Cyrille Vigneron at Cartier, the Jewellery division has achieved one of the best growth rates in the Luxury Goods sector.
At the same time, the E-commerce division is laying the groundwork for a change in business model (introduction of a marketplace, partnerships with other players), which should help curtail losses.
The rapid spread of the Omicron variant is not causing any major concerns in the market. On the macroeconomic front, indicators remain at high levels as shown by the ISM. To us, this seems to be the consensus view today. Following a V-shaped economic recovery, the potential for positive surprises seems more limited to us, which is consistent with a mid-cycle configuration.
As always, we invite investors and prospective investors, to get in touch should you wish to discuss the positions held in the portfolio. Please do not hesitate to contact us for further information.
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The views and statements contained herein are those of Phileas Asset Management in their capacity as Investment Adviser to the funds as of 07/01/2022 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.