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Institutions and charities

Artemis Institutional Global Capital Fund

All data as at 30 December 2016 except where specified
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The fund’s aims

The fund aims to provide investors with capital growth from a diversified portfolio investing in any economic sector in any part of the world.

Current prices and yield

As at noon, 30 March 2017
Accumulation units140.64p
Historic yield (acc units)1.55%

Investment information

Ongoing charge (acc units)0.81%

Fund manager review

For sterling-based investors, global equities ended 2016 on a high note. Thanks largely to the 5% decline in the pound versus the dollar, the MSCI AC World Index rose by 6.4% in sterling terms on the quarter.

US equities performed best and all other regions underperformed, with emerging markets trailing the most.

US equities performed best and all other regions underperformed, with emerging markets trailing the most. At the sector level, resources and financials led while defensives such as consumer staples, utilities and telecoms lagged.

With a 6.7% gain, the fund outperformed marginally. Being overweight in cyclicals versus defensives helped, as did our bias to mid caps. But our large overweight in emerging markets prevented that outperformance from being more pronounced. For 2016 as a whole, the fund returned 24.4% versus 28.7% increase in its benchmark. Over the last five years, the fund has delivered annualised performance of 19.0%, well ahead of the 14.5% return from its benchmark.

Standout performers this quarter included China State Construction Engineering (up 45%), a collection of US regional banks such as Great Western Bancorp, Citizens Financial and LegacyTexas Financial (up between 37% and 52%) and Russia’s Lukoil (up 24%).

On the negative side, Swedish cosmetics maker Oriflame (which had been our biggest contributor in the third quarter) released disappointing quarterly results (down 13%), Danish wind turbine maker Vestas provided soft guidance (down 17%) and Korean insurer Hyundai Marine & Fire declined in the absence of any material corporate news (down 15%). We are sitting tight in all three positions.

Amid increasing signs of a globally synchronised economic recovery and firm commodity prices we have continued to increase our exposure to cyclicals in general and to resource stocks in particular.

We thus added new positions in: oil producers Royal Dutch Shell, CNOOC (China) and Gazprom (Russia); oil services companies TGS-NOPEC and Subsea 7; and oil refiners Valero Energy and Tesoro. We also established new investments in chemical companies Celanese (US), BASF (Germany) and Tosoh (Japan) and basic resource stocks KapStone Paper and Packaging (US), Norilsk Nickel (Russia), Kumba Iron Ore (South Africa) and ArcelorMittal (Netherlands).

These purchases were financed by sales in the healthcare and utility sectors. We sold our holdings in Pfizer, Shire and Laboratory Corp of America and reduced our holding in Johnson & Johnson. In utilities, we sold RWE and Rubis and cut our investment in Tenaga Nasional of Malaysia.

Regionally, we reduced our overweight in emerging markets from 15% to 11% and reallocated the capital to US mid-caps exposed to domestic demand such as entertainment service provider MSG Networks, housebuilder Taylor Morrison, fashion retailer Francesca’s, motor home maker Winnebago and airlines Hawaiian and Spirit Airlines.

At the end of the year, the fund’s principal exposures remain being overweight emerging markets and Europe, with underweights in all other regions. At the sector level, we prefer autos, basic resources and banks to healthcare, food & beverages and technology.

The fund’s bias towards value stocks, meanwhile, has become even more pronounced. At the end of December its average price-to-earnings ratio was 11.1x versus 15.3x for the market, a 28% discount (up from 24% at the end of the third quarter).

As ever, we are agnostic about the outlook for the global equity market in general. On the one hand we are encouraged by signs of a broadening global economic recovery. But on the other we are concerned by the rise of populism and protectionist rhetoric. Rather than making sweeping statements about where the world is heading we will stick to picking stocks whose specific characteristics make them attractive. This has served us well as managers of the fund over the last 13 years and will hopefully continue to do so for many more years to come.

04 November 2016

Update on the Artemis Institutional Global Capital Strategy


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Update on the Artemis Institutional Global Capital Strategy

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Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
Issued by Artemis Fund Managers Limited which is authorised and regulated by the Financial Conduct Authority.

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