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Disclaimer This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.
McPhail HLG Financial Planning Pty Ltd 38 Ellingworth Parade, Box Hill VIC 3128 PO Box 93, Box Hill VIC 3128 Australia t +61 3 9898 9222 f +61 3 9890 6310 email planner@mcphail.com.au www.mcphail.com.au
McPhail HLG Financial Planning Pty Ltd ABN 27 091 207 000 is a Corporate Authorised Representative and Corporate Credit Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL and Australian Credit License 240687 Level 7, 530 Collins Street Melbourne VIC 3000 Australia
Liability limited by a scheme approved under Professional Standards Legislation
The returns over the past year have lagged the relevant benchmark. However we believe this is a cyclical factor driven by the out-performance of lesser quality companies leveraged to global economic recover. We are comfortable in this regard as it provides us with confidence that the portfolio consists of higher quality companies with long term operational capabilities. The outperformance over the longer term is instructive when you consider the impacts of the events of 2008. The following table indicates the current top 10 holdings of the fund. These represent a total of 21.3% of the portfolio.
Top 10 Holdings as at 31 March 2013 Adobe Systems TJX Companies Mastercard Inditex Novo-Nordisk Honda Motor Denso Corp Amphenol Corp Essilor Intl CNOOC 2.2% 2.2% 2.2% 2.2% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%
Investment Philosophy
Walter Scott targets absolute long term real returns of 7% - 10% p.a. and believe the best way of achieving this is by investing in companies with high rates of internal wealth generation - that is companies that can grow their business in a profitably and sustainable manner. The manager will construct a diversified portfolio consisting of 40 60 stocks. These will be drawn from a pool of potential candidates that appear capable of generating strong internal rates of return. Risk is managed by focussing on companies that, amongst other things, have sustainable earning and strong free cash flow generation and avoiding companies with high gearing levels. The portfolio will generally display considerable deviation from sector and geographic benchmarks. This is a result of the purely company driven focus of the portfolio construction. For example the fund has exposure to Spain, not because of the Spanish economy, but because the fund holds Inditex (the name behind Zara, amongst other brands). An overweight position in the IT sector is not a bet on the future prospects of the sector, but arises from research generated exposures to the likes of Adobe Systems. Interestingly, the fund does not hold investments in market heavy weights such as Apple Inc and Exxon Mobil, at this point in time, as they do not meet the managers criteria for inclusion in the portfolio. Since inception (31 March 2005 in Australia), the fund has produced an annualised return after fees of 3.6% p.a., compared to the relevant index return of 1.00% p.a. over the same time period. The following table illustrates the performance of the fund to 31 March 2013 (after fund manager fees):
Return after 1 3 manager fees month month Walter Scott Global Equity MSCI World Ex Australia Active return 0.3% 0.6% 5.2% 1 year 8.9% 3 years 4.0% 3.9% 0.1% 5 years 2.9% -0.6% 3.5% Since Inception (pa) 3.6% 1.0% 2.6%
We expect that while markets remain generally buoyant, this fund will tend to underperform the relevant benchmark. During down markets we would expect the fund to outperform as the broader market tends to retreat to quality during market uncertainty. The fund will tend to have little overlap with the companies held by other funds in this part of the portfolio. For most, the table above will contain a number of names that are unfamiliar (Novo-Nordisk may be familiar to Diabetics, Essilor to those of us wearing corrective lenses). Nevertheless we are confident that the rigorous processes of the manager will provide strong risk adjusted returns over the longer term. We believe the fund blends well with other Global Equity funds by providing a concentrated exposure to companies with significant growth potential. For further information regarding this or any other investment, please contact this office.
7.2% 10.8%