Artemis SmartGARP Global Equity Fund update

Raheel Altaf, manager of the Artemis SmartGARP Global Equity Fund, reports on the fund over the quarter to 30 June 2024.

Raheel Altaf

Source for all information: Artemis as at 30 June 2024, unless otherwise stated.

  • In Q2 the fund returned 4.1% vs. MSCI ACWI index's 2.8% (in sterling terms). 
  • Year to date the fund has returned 17.6% vs. the index's 12.2%, putting the fund in the top quartile.  
  • Value bias in the fund remains substantial, 45% discount to MSCI ACWI index…
  • …yet with attractive quality and growth characteristics 

12m forward P/E ROE Dividend yield
Fund 9.7x 13.7% 3.7%
Benchmark 17.6x 14.1% 2.0%
Relative -45x -0.4% 85%
Source: Artemis, Bloomberg, MSCI as at 30 June 2024. ROE is a blend of 3-year trailing and 2-year forward.

Performance – outperforming in a rising market

Economic growth data signalled an upswing, mostly driven by consumption. Manufacturing data continued to improve. The backdrop of falling inflation, albeit at a slower pace than had been expected, helped.

Elections present some risks ahead, but the environment is supportive of equities overall. Global stocks were up around 3% on the quarter reflecting this positive sentiment. US and emerging market stocks led, with technology and communication services the best performing sectors and defensives lagging.

The fund outperformed the index over the quarter, returning 4.1% vs. the MSCI ACWI's return of 2.8%. This was due to positive stock selection, a pleasing result against a market with concentrated leadership from mega cap technology stocks.

Three months Six months One year Three years Since launch*
Artemis SmartGARP Global Equity Fund 4.1% 17.6% 21.4% 26.5% 304.4%
MSCI World NR GBP 2.8% 12.2% 20.1% 28.1% 385.5%
IA Global Average 1.0% 8.7% 15.0% 16.3% 293.3%

Past performance is not a guide to the future. Source: Lipper Limited from *9 September 2002 to 8 July 2024. Data prior to 7 March 2008 reflects class R accumulation GBP. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. This class may have charges or a hedging approach different from those in the IA sector benchmark. 

Attribution – Chinese exposure adds significant value

A broad range of companies from the portfolio contributed positively to performance over the quarter. We have commented on the improving risk/reward ratio in Chinese stocks for some time, as the disconnect between share prices and fundamental performance has created significant opportunities. A number of these were additive in the period. In energy, CGN Power, China Suntien Green and CNOOC featured. We also saw positive contributions from Chinese banks: China CITIC, Bank of Communications and China Construction Bank.

On the negative side, our underweights to some of the index’s largest constituents held performance back. These included Nvidia and Apple, which were boosted by enthusiasm over AI.

Outside of the US, BBVA (banks), and Toyota (autos) also held back performance. Despite these headwinds the fund delivered positive absolute and relative performance in a strong quarter for global markets.

Activity – reducing insurance exposure and adding to AI investment beneficiaries

Additions – improving fundamental trends

  • AI investment – Nvidia, Alphabet, Samsung Electronics, Qualcomm
  • Pharma - Pfizer

Sales – rotation out of defensive areas

  • Insurance – Hartford Financial, PICC, Chubb
  • Telecoms – Verizon
  • Pharma – Johnson & Johnson
  • Weakness – Toyota

Deeply discounted with attractive growth and quality metrics

Despite these changes, the fund's high-level characteristics remain the same. Its valuation is at a significant discount to the market and yet is has attractive growth and income characteristics. These attractive characteristics are an output of the opportunity set at a stock level that the SmartGARP stock screening tool is pointing us towards.

At a regional level, little has changed. We remain heavily overweight to emerging markets and Europe, with a substantial underweight to the US (45% of the fund vs. 68% Index). At a sector level we remain overweight to banks, oil & gas, and food & beverages. Our main underweights are to technology (although less so), and to financial services, and industrial goods.

Global equities – valuation dispersion offers attractive environment for systematic stock selection

There has been significant dispersion in returns across markets, both at a regional and sector level. Valuations are similarly polarised, with the US looking expensive relative to its history and areas within emerging markets and Europe trading at more attractive valuations. This dispersion opportunity is reflected in our positioning mentioned above. Emerging markets (a sizeable overweight in the fund) are benefitting from supportive monetary policy as well as signs of improved conditions in China which would boost investor sentiment towards the region. In Europe (another overweight region) and in particular the UK, we are seeing attractive valuations as well as a more optimistic tone around the growth of the UK economy and a more benign election relative to other countries around the globe.

Our focus on fundamentals continues

We continue to focus on the fundamental performance of businesses and look for instance where that performance is not reflected in share prices. This has led us to a portfolio that looks quite different to the index it is benchmarked against.

Benchmarks: MSCI AC World NR; A widely-used indicator of the performance of global stockmarkets, in which the fund invests. IA Global NR; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. These benchmarks act as ‘comparator benchmarks’ against which the fund’s performance can be compared. Management of the fund is not restricted by these benchmarks.

Raheel Altaf

Manages:

‘Global emerging markets equity‘, 'Global equity' strategies

Raheel joined Artemis in 2014 and has managed Artemis‘ ‘global emerging markets equity‘ and ‘global equity’ strategies since launch in April 2015 and since April 2022, respectively.

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