Year to date performance overview
Note: Performance data net of fees (B shares) in USD as at 31 August 2022. Past performance is not a guide to future performance. References to a market index or peer group are for comparison purposes only; the market index is not mentioned in the sub fund's investment policy. Sources: BLI/Lipper.
YTD | 3 years | Since inception * | |
BL American Small & Mid Caps | -19.6% | 35.7% | 110.5% |
MSCI US Small + Mid NR USD | -16.1% | 34.0% | 89.6% |
After 2 years (2020 and 2021) of excellent performance, the Fund has underperformed since the beginning of 2022, albeit moderately compared to the ‘growth’ funds universe that are suffering from much greater underperformance.
Overall, the Fund was penalised by a negative allocation effect which was not fully offset by the fund manager's good stock selection. Indeed, in this market environment of inflation, tightening in central bank monetary policies, and supply-chain issues, the growth style is mired in the value style, which widens the gap. This situation has de facto penalised the Fund as it has a structural bias in favor of quality growth stocks.
Portfolio positioning
At the end of August, the Fund held 48 individual positions; the top 10 represented 29% of assets under management.
The Fund remains primarily invested in quality growth stocks. In line with this approach, sector allocation continues to favour the IT (27.6%), Industrials (22.5%) and Healthcare (19.3%) sectors; conversely, it remains absent or significantly underweight in the Financial, Energy and Utilities sectors where companies do not meet our selection criteria.
As a reminder, the Fund invests in US small and mid-caps (maximum capitalisation of 25 billion US dollars at the time of purchase). At the end of August, 71.5% of the portfolio was invested in companies with market capitalisation of between USD 7.5 and 30 billion.
Recent transactions
Since the beginning of the year, the manager has cleared two positions: IPG Photonics, a manufacturer of high-end fibre optic lasers suffering from increased competition from Chinese companies and Sensient, a company specialising in fragrance, odour and taste solutions for food and beverages, whose valuation had reached its target price.
A new security has been added to the portfolio during the year: Paycom Software, a specialist in the development and marketing of cloud based human resources management software.
Conclusion
Despite a difficult start to the year in which the Fund not only posted a negative performance but its first underperformance in bear markets, the strategy remains solidly anchored in stock-picking, which is its source of alpha. Indeed, the Fund's quality growth approach with an ESG prism filters out the market’s most value and cyclical stocks which have outperformed the market by far on the year to date. While not offsetting this negative allocation impact, stock-picking is still of high quality.
The manager's proactiveness also helps the Fund stand out over time, with a risk-return ratio that is far better than its competitors’ “growth” funds, which have borne the brunt of the collapse of pure “growth” US small and mid-caps since the fourth quarter of 2021.