AMP Capital Specialist Intl Shr (Hdg) A (AMP0825AU) Report & Performance

The Fund posted a negative return and underperformed its benchmark during the March quarter. In a declining market, the Fund’s underlying managers lost ground, however Schroders and Arrowstreet outperforming their respective benchmarks. The Fund continues to outperform its benchmark over the long term, including since inception (annualised). (All returns are before fees.)

Country allocation detracted overall from relative returns over the period, due to the Fund’s exposures to emerging markets. Within developed markets, the main positive contributors were an overweight exposure to Australia and an underweight position in Germany, whereas the main detractors were an underweight exposure to Canada and overweight position in the Netherlands. Emerging markets positions, primarily the small holdings in Russia saw heavy falls, more than offsetting the strong returns from holdings in Brazil. The Fund’s cash position, which is held mainly in US dollars, added value as markets retreated.

Sector allocation added value overall to relative returns with most positions contributing, with an overweight exposure to energy the key driver. Conversely, the underweight exposures to health care and utilities were the main detractors. Stock selection detracted overall from relative returns, particularly positions in energy, communication services and financials stocks, while positions in materials and information technology stocks outperformed the most.

The Fund posted a positive return, however underperformed its benchmark (before fees) in the June quarter. All of the Fund’s five underlying managers gained ground, with American Century outperforming the benchmark. The Fund continues to outperform its benchmark over the long term, including over 5 years and since inception (annualised). (All returns are before fees.) Country allocation was the main detractor from relative performance during the period. Within developed markets, the underweight exposure to the US and overweight position in Japan detracted, while positions in emerging markets, in particular South Africa and China, hampered the return. The Fund’s cash position (primarily in US dollars held by Magellan) also detracted, as share markets rose strongly. From a sector perspective, allocation detracted from the Fund’s relative return, primarily due to the underweight exposure to information technology. Stock selection also detracted overall, with positions in information technology and consumer discretionary a considerable drag on performance, outweighing the positive contribution from stock selection within industrials.

The Fund posted a positive return to outperform its benchmark (before fees) in the March quarter. All of the Fund’s five underlying managers posted positive returns, while three managers comfortably outperformed their respective benchmarks, led by Schroders and Arrowstreet.

The Fund continues to outperform its benchmark over the long term, including over 5 years and since inception (annualised). (All returns are before fees.) Country allocation contributed to relative performance during the period. Whilst the positioning in developed markets was broadly neutral overall, the emerging markets’ exposure, specifically in South Africa and China, added most value.

From a sector perspective, allocation was broadly neutral overall for returns, with the underweight exposures to health care and information technology as well as the overweight to communication services offsetting the detraction from the underweight exposure to financials. Stock selection within information technology added considerable value during the period.

Stock selection was the primary driver of relative returns overall. The largest individual contributors were an underweight position in Apple and being overweight in Alphabet and Tencent Holdings. US-based technology company Apple (-7%) retreated during the period along with many technology and growth stocks, as inflationary fears and rising bond yields triggered some market rotation.

The Fund posted a strong positive absolute return, however underperformed its benchmark (before fees) during the December quarter. Led by Orbis and Arrowstreet, four of the Fund’s five underlying managers gained ground, whilst Magellan was a significant laggard. Orbis, Arrowstreet and American Century also outperformed their respective benchmarks, whilst Magellan and Schroders underperformed. The Fund continues to outperform its benchmark over the long term, including over 5 years and since inception (annualised). (All returns are before fees.) Country allocation detracted overall from relative performance during the period.

The exposure to emerging markets specifically in China detracted most, as did the underweight allocation to France, more than offsetting the contributions from an underweight position in the US (a major contributor within developed markets) and holdings in South Korea. The Fund’s cash position (primarily in US dollars held by Magellan) was also a significant detractor from the relative return, as share markets rose strongly. Sector allocation (excluding the cash position) was broadly neutral for relative returns. The underweight exposure to health care and an overweight in communication services were the main contributors, whilst being underweight financials and energy were the main detractors. Stock selection added to relative returns overall. The largest individual contributors were overweight positions in XPO Logistics and Howmet Aerospace and having nil holding in salesforce.com.

US transport company XPO Logistics (+31%) rallied during the latter half of the period after the company released results for Q3 2020 which exceeded investor expectations, with sentiment being boosted further on optimism surrounding a COVID-19 vaccine. Shares in US-based aerospace engineering manufacturer Howmet Aerospace (+59%) rallied on the news of promising developments in COVID-19 vaccine trials which bodes well for air travel. US cloud-based customer relationship management company salesforce.com (-17%) fell after some market participants expressed concern about the company’s proposed acquisition of Slack Technologies.

The largest individual detractors were overweight positions in Alibaba Group and Reckitt Benckiser Group and having nil holding in Tesla. Shares in Chinese e-commerce company Alibaba Group (-26%) suffered after affiliate Ant Group’s suspension of its initial public offering, the release of mixed results for Q3 2020, Chinese authorities said they would investigate the company for “suspected monopolistic conduct” and key founder Jack Ma disappeared after criticising financial authorities. Anglo-Dutch consumer health and hygiene products company Reckitt Benckiser Group (-15%) saw its share price fall following the company’s announcement of results for Q3 2020 where sales were lower than investor expectations and company management lowered its previous forecasts for full year revenue and profit margins.

Shares in electric vehicle and clean energy company Tesla (+53%) soared as the stock was included in the S&P 500 index and on the back of several broker analyst upgrades for the company’s prospects on the basis of a surge in overall electric vehicle demand. The hedged exposure to the Australian dollar had a positive impact on returns, primarily due to the currency’s appreciation compared to the US dollar over the period.