AB Global Equities aims to achieve returns in excess of the MSCI All Country World Index in Australian dollars, after fees, over the medium to long term.
• In September, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down 3.80% in Australian dollar terms.
Contributors
• UK-based oil giant Shell contributed to results. Oil demand continues to recover, and Shell boasts solid fundamentals with a strong project pipeline and an attractive dividend yield. The Portfolio’s Investment Management Team (the Team) finds Shell attractively valued, offering mid-teens free-cash-flow yield with realistic targets of growing free cash flow/share 10%/year toward 2030.
• China-based fast-food restaurant company Yum China contributed. The company increased its new stores targets, and its investments in digitalization have decreased the number of staff needed at new stores. The Team maintains Yum China supported by a superior growth potential.
• Samsung Electronics contributed on news that the electronics firm would begin supplying memory chips to NVIDIA, a leader in artificial intelligence. The Team believes Samsung Electronics is wellpositioned in semiconductors (particularly memory) with shares offering compelling upside.
Dectractors
• Commercial real estate firm CBRE detracted as higher borrowing costs and the possibility of further rate hikes weighed on the commercial property market. The Team finds CBRE best positioned within the commercial real estate service segment and likes the current valuation.
What is AB Global Equities AB Global Equities is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Fundamental Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The AB Global Equities has Assets Under Management of 423.89 M with a management fee of 0.85%, a performance fee of 0.00% and a buy/sell spread fee of 0%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the AB Global Equities has returned 1.91% in the last month. The previous three years have returned 8.65% annualised and 11.05% each year since inception, which is when the AB Global Equities first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since AB Global Equities first started, the Sharpe ratio is 0.7 with an annualised volatility of 11.05%. The maximum drawdown of the investment product in the last 12 months is -4.83% and -19.04% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The AB Global Equities has a 12-month excess return when compared to the Foreign Equity - Large Fundamental Index of -3.03% and -1.32% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. AB Global Equities has produced Alpha over the Foreign Equity - Large Fundamental Index of -0.11% in the last 12 months and -0.04% since inception.
What are similar investment products?
For a full list of investment products in the Foreign Equity - Large Fundamental Index category, you can click here for the Peer Investment Report.
What level of diversification will AB Global Equities provide?
AB Global Equities has a correlation coefficient of 0.93 and a beta of 0.9 when compared to the Foreign Equity - Large Fundamental Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on AB Global Equities and its peer investments, you can click here for the Peer Investment Report.
How do I compare the AB Global Equities with the Developed -World Index?
For a full quantitative report on AB Global Equities compared to the Developed -World Index, you can click here.
Can I sort and compare the AB Global Equities to do my own analysis?
To sort and compare the AB Global Equities financial metrics, please refer to the table above.
Has the AB Global Equities been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in AB Global Equities?
If you or your self managed super fund would like to invest in the AB Global Equities please contact 32/88 Phillip St, Sydney NSW 2000, Australia via phone 02 9255 1200 or via email Aust_ClientService@alliancebernstein.com.
How do I get in contact with the AB Global Equities?
If you would like to get in contact with the AB Global Equities manager, please call 02 9255 1200.
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the AB Global Equities. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 • In August, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.14% in Australian dollar terms.
Dectractors
• PayPal detracted, as the digital payment platform’s 2Q:23 margins declined from the first quarter on higher expenses related to bad loans, though its revenue and earnings beat analysts’ expectations. The Portfolio’s Investment Management Team (the Team) maintains PayPal on attractive valuation grounds following significant derating. Longer term, the Team expects PayPal to grow in line with e-commerce, which is not reflected in the current valuation.
• Investment bank Goldman Sachs detracted, lagging peers, as the company has divested from its struggling consumer banking business. The Team finds Goldman Sachs trading at a compelling valuation considering continuously leading market positioning as well as achievable profitability targets’ return on tangible equity of 15%–17%.
• QUALCOMM detracted on concerns around a lackluster rebound in demand for smartphones, particularly given deteriorating macro signals from China. The Team believes that QUALCOMM is attractively priced, now trading at a major discount versus semiconductor peers.
Contributors
• Cloud services and cybersecurity company Akamai Technologies contributed in August. The company provided fiscal third-quarter revenue and profit guidance above analyst expectations, driven in part by strong demand for cybersecurity services. The Team finds Akamai well positioned as the leading player within the content delivery network, while benefiting from compelling growth within its security segment.
• Cognizant contributed after the technology firm announced plans to invest $1 billion to expand its generative artificial intelligence capabilities over the next three years. The Team exited Cognizant following this outperformance on weakening fundamentals.
Performance Commentary - July 31, 2023 • In July, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.40% in Australian dollar terms.
Contributors
• Alibaba Group rallied as the Chinese government announced a fine for Ant Group, which was viewed as the end of the regulatory crackdown on Alibaba. The government has recently become more supportive of private businesses, especially internet platform companies. In addition, Alibaba is expected to report accelerating gross merchandise value growth and continued margin expansion for the second quarter. The Portfolio’s Investment Management Team (the Team) finds Alibaba attractively valued.
• US-based investment bank Goldman Sachs contributed. While writedowns on its consumer businesses hurt earnings, shares climbed on management’s positive outlook for investment banking. The Team maintains Goldman Sachs on a combination of continued market leadership, attractive valuation and an expectation of the bank being able to deliver on its 15%–17% return on tangible equity target.
• Oilfield services company SLB contributed. The stock rose on expectations that the Fed would slow rate hikes, easing recessionary worries that have dampened the outlook for oil demand. The Team views SLB as well-positioned for growth following a period of underinvestment within the oil industry
Dectractors
• British foodservice company Compass Group detracted. The company has made progress on margins by increasing prices and mitigating higher costs, but it cautioned that such progress could slow if inflation persists. The Team believes Compass Group still has some margin catch-up ahead of it, and continues to like the leading market position.
• South Korea-based electronics manufacturer Samsung Electronics detracted from results. Inflation-dampened consumer demand and excess memory-chip inventories have hurt the company’s semiconductor sales, leading to production cuts. The Team maintains Samsung Electronics due to attractive valuation with leadership position across several businesses.
• US-based payments company American Express detracted as investors weighed a potential uptick in customer defaults against the company’s record profits. Earnings for 2Q:23 topped analysts’ expectations, but revenue disappointed and credit losses edged up. The Team finds American Express attractively valued.
Performance Commentary - June 30, 2023 • In June, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 2.87% in Australian dollar terms.
Detractors
• Health insurance provider Elevance Health detracted amid a broad sell-off of health insurers after competitor UnitedHealth Group warned that pent-up demand for surgeries would lead to increased costs for insurance companies. The Portfolio’s Investment Management Team (the Team) maintains Elevance on compelling valuation and expectations of continued 12%-15% earnings-pershare growth.
• US-based investment bank Goldman Sachs detracted during the month. The company announced additional job cuts and cautioned that the economic environment would lead to a slowdown in dealmaking and trading revenue. The Team’s investment case in Goldman Sachs is supported by valuation and trading around book value per share, while guiding toward 15%-17% return on tangible equity in the medium term.
• Swiss pharmaceutical giant Roche detracted. Following greater competition and declining sales for its cancer medicines, the company announced it will seek to sell its biologic drug plant in California, where some of its cancer medications are made. The Team maintains Roche due to its valuation and strong franchise.
Contributors
• Otis Worldwide, which manufactures, installs, and services elevators and escalators, contributed during the month. Investors believe that Otis is positioned to benefit from recent federal legislation that will increase infrastructure spending. The Team finds Otis attractively valued with the market not appreciating the stability of its service business.
• Parker Hannifin, which specializes in motion-control technologies, contributed as the company benefited from supply chain automation, lifting its e-commerce sales. The Team’s investment case in Parker Hannifin has played out; hence, shares were reduced during the month.
• Oilfield services company SLB contributed after Saudi Arabia announced plans to cut oil production in July in a bid to increase oil prices amid waning global demand. The Team believes that SLB is attractively valued with the market underappreciating its potential superior EBITDA growth over the coming years.
Performance Commentary - May 31, 2023 In May, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.02% in Australian dollar terms.
Detractors
• PayPal detracted as the e-commerce company’s 2023 outlook disappointed investors. Its first-quarter earnings, revenue and payment volume all rose on a year-over-year basis, but the company’s revised earnings guidance raised concerns about pressure on margins. The Fund’s Investment Management Team (the Team) believes PayPal is attractively priced considering its above-average growth prospects, combined with cost saving opportunity and prudent capital management.
• Coffeehouse chain Starbucks detracted following concerns that the growth from China’s economic reopening was moderating, offsetting positive signals in its North American segment, which saw yearover-year quarterly revenue and margin growth. The Team maintains Starbucks primarily for its superior growth.
• Coca-Cola detracted as the soft drink manufacturer’s revenue growth recently slowed, although 1Q:23 revenues beat analyst expectations. Persistent inflation has also hampered results as production costs continue to rise. The Team finds Coca-Cola attractively priced on a cash-flow perspective.
Contributors
• Alphabet Inc., parent company of technology giant Google, contributed in May. At its developer’s conference, Google announced new artificial intelligence (AI) product features, boosting its credibility in the AI race and sending shares higher. The Team believes that Alphabet remains attractively priced with superior longer-term growth prospects.
• Software giant Microsoft contributed. While growth has slowed in its cloud business, the company has positioned itself to benefit from the rise in artificial intelligence with investments in ChatGPT and related product launches. The Team finds Microsoft attractively valued, with secular growth drivers being currently underappreciated, and likes its healthy balance sheet and discount compared with other software players.
• Akamai Technologies, a cloud services and content delivery network operator, contributed. Shares rose following the company’s strong 1Q:23 earnings. Both revenue and earnings topped analyst expectations. The Team maintains Akamai Technologies due to compelling valuation with a positive driver from continued mix shift toward security offering.
Performance Commentary - April 30, 2023 • In April, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.80% in Australian dollar terms.
Contributors
• Medical technology company Medtronic contributed. Shares rose on positive quarterly reports from industry peers, suggesting a favorable environment for medical device producers. The Portfolio’s Investment Management Team (the Team) believes that Medtronic has been on the right track since Geoff Martha took over as CEO, and likes its positioning within the med tech space.
• Asahi Group, the Japan-based food and beverage company, contributed. The company recently announced plans to increase prices, a move that should help offset rising production costs and aid margins. A rebound in tourism in Japan has also provided a tailwind for the stock. The Team’s investment case in Asahi Group is based on valuation, as its shares are trading at a massive discount versus those of international beverage peers. Most of Asahi’s sales are overseas, and the Team expects continued synergies from its integration with Carlton & United Breweries.
Detractors
• China-based e-commerce giant Alibaba Group detracted from performance. The stock has been volatile since the company announced plans to split into six different businesses earlier this year, and shares fell amid mixed economic data suggesting an uneven recovery from China’s zero-COVID policies. The Team maintains Alibaba Group primarily on valuation grounds, paying very low multiples for a net-cash leading player in the domestic e-commerce and cloud spaces, areas that are exposed to double-digit secular growth.
• Semiconductor company QUALCOMM detracted, as weak demand for handsets has pressured sales for chipmakers, leading to higher inventory levels and lower prices. The Team finds QUALCOMM attractively valued following its recent de-rating, trading at significant discount compared with the semiconductor index
Performance Commentary - March 31, 2023 In March, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 3.79% in Australian dollar terms.
Detractors
• Commercial real estate firm CBRE detracted. Shares fell amid a broad sell-off in real estate stocks as the Fed dashed hopes that the turmoil in banking would lead to a pause in rate hikes. The Portfolio’s Investment Management Team (the Team) finds CBRE strongly positioned within the commercial real estate services space with leading positions across property sales, leasing and facility management among others. CBRE’s balance sheet is strong and valuation undemanding, in the Team’s opinion.
• Wells Fargo detracted as US banks suffered from a broad sell-off following the collapse of Silicon Valley Bank as investors feared further contagion in the financial system. The Team reduced its position in Wells Fargo as better risk/reward was observed elsewhere within financials, i.e., within exchanges.
Contributors
• Software giant Microsoft contributed during the month. The company has shown early leadership in artificial intelligence (AI) services, such as its recent development in cybersecurity AI. The Team finds Microsoft attractively valued with secular growth drivers being underappreciated, as well as a healthy balance sheet and a discount compared with other software players.
• France-based multinational pharmaceutical and healthcare company Sanofi contributed. Its asthma drug Dupixent, jointly developed with Regeneron, showed promising results for treating chronic obstructive pulmonary disease, sending shares higher. The Team’s investment rationale in Sanofi is supported by attractive valuation, which doesn’t fully cover the expected growth from Dupixent over the coming years.
Performance Commentary - February 28, 2023 In February, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.50% in Australian dollar terms.
Detractors
• Alibaba Group, which is largely used as a proxy for Chinese equities, detracted amid profit-taking—driven by speculation over rising geopolitical tensions. The Portfolio’s Investment Management Team (the Team) finds Alibaba attractively valued, still trading at low-teens earnings with a healthy net cash balance sheet. Further support for the investment case is its market-leading position with double-digit revenue growth and expected margin expansion.
• Akamai Technologies, a cloud services and content delivery network operator, detracted. Shares fell after the company reported 4Q:22 financial results. Although earnings exceeded expectations, competitive concerns regarding its cloud computing segment led to an analyst downgrade. The Team maintains Akamai Technologies for its superior lead in content delivery networks, while growing handsomely in its security business. Valuation doesn’t screen compelling compared with IT peers.
• Video game company EA detracted, with sales of recent new releases underperforming expectations. The Team invests in EA, supported by its valuation (market multiple for better revenue and earnings CAGR), as well as its high moat sporting franchise (including FIFA), with a high level of recurring revenue.
Contributors
• Japan-based food and beverage company Asahi Group contributed as healthy quarterly numbers led to a much-improved leverage profile. Improved pricing and continued market-share gains were further supportive. The Team finds Asahi Group attractively valued, trading at a compelling discount versus international peers.
• UK-based oil giant Shell contributed during February. Shares climbed after the company reported better-than-expected earnings, as favourable natural gas trading offset lower oil and gas prices. The Team’s investment case in Shell is supported by superior cash-flow generation with a prudent stance toward capital deployment.
• Parker Hannifin, which specializes in motion control technologies, contributed. The company reported strong second-quarter results for its fiscal year 2023, with revenue and earnings beating expectations, sending shares higher. The Team holds Parker Hannifin for its attractive valuation, though risk/reward is less attractive following recent strength in share price.
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