Global Impact Equity Fund

Capital at risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

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Overview

Strategy

Fund Summary

The fund uses a global opportunity set to look across all countries, sectors, and market capitalisations, while actively excluding non- impact areas of the global economy, to find stocks with clear impact and financial return markers. We leverage integrated fundamental research and ESG resources to systematically and proactively evaluate the quality and long-term sustainability of investment candidates. The manager is not constrained by the fund’s benchmark, which is used for performance comparison purposes only.

OUR VIEWS ON GLOBAL EQUITIES

30-Sep-2020 - Scott Berg, Portfolio Manager,

Given the high degree of difficulty we are seeing in navigating today's market, we are focused on maintaining a broadly balanced portfolio and remain largely sector neutral in our positioning. We also want to be cognizant of heightened risk and a diversified portfolio helps us mitigate these risks and avoid high correlation and unintended bets. We still own a blend of structural winners, durable compounders, and higher yielding names that held up well during the March sell-off but lagged on the way back up.

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Sector-wise, we are overweight consumer discretionary and financials, though not dramatically so. During the quarter, our allocations to industrials and business services and utilities increased, while our exposure to information technology and materials decreased as we trimmed or eliminated strong winners. From a regional perspective, the continued strong performance of developed equity markets relative to their emerging markets counterparts has led to our EM weighting trending modestly lower. However, in a low growth world, we continue to think investing in the fast growing emerging market countries, such as India, Indonesia, Philippines, Vietnam, and Peru, will be more important than ever.

Industrials and Business Services

The industrial economy is slowly starting to recover. Areas such as the airline industry remained challenged, but we are finding opportunities elsewhere within the sector, and are taking a long-term approach with our investments in the space. We remain focused on high-quality companies that can benefit from multiyear growth trends and increases in global trade and capital spending. We are attracted to less cyclical, durable earnings growers in industries with attractive growth dynamics and are largely avoiding companies with commodity capital expenditures exposure.

We began a position in global parcel and freight delivery service FedEx. We think FedEx offers a compelling cyclical opportunity due to a number of positive growth drivers that should coalesce over the near term. In particular, the coronavirus has increased demand and tightened capacity, leading to higher pricing for the industry. We also think there are company-specific tailwinds that should help drive accelerating earnings and margin improvement, including better cost synergies and prolonged capacity constraint and pricing strength in air freight, where FedEx has a dominant position.
We started a position in Chart Industries, which provides equipment and supplies for the industrial gas, energy, and biomedical industries. We think the firm's most compelling segments are in supplying industrial gases like hydrogen as well as cryogenics, and believe there are a number of growth drivers, both cyclical and structural, that could help fuel accelerating earnings over the long term. With a diversified business structure in an industry with high barriers to entry and little competition, we think Chart Industries is well positioned for growth over the long term.

Financials

With leading central banks having cut rates and ramped up quantitative easing measures to help counteract the negative economic impact from the coronavirus, we think we are in a lower rate environment for longer than we had anticipated. While we remain underweight developed market banks due to the challenging rate environment, we have found idiosyncratic ideas in the U.S., Europe, and Canada to add to the portfolio. Our bets within the sector are largely concentrated in capital markets names and emerging market banks. We also have exposure to high-quality insurance companies.

We eliminated our position in DNB, Norway's largest retail and commercial bank. The stock spiked on strong earnings results, so we chose to move on to higher conviction names.

Consumer Discretionary

In our view, there are more coronavirus beneficiaries in the consumer discretionary sector than anywhere else, but this has led to a dramatic demarcation between winners and losers. The coronavirus has pulled forward years of e-commerce share gains in the span of a few months and we have an expanded set of names levered to that trend.

We initiated a position in THG Holdings, participating in the firm's initial public offering (IPO). THG owns The Hut Group, which operates as a multi-website online retailer that provides health, beauty, fashion, lifestyle, and marketplace services. We think THG is an extremely compelling company that is only just beginning to develop a differentiated enterprise e-commerce platform to help brands and retailers build a global online direct-to-consumer footprint.

Materials

The coronavirus-induced economic downturn has, not surprisingly, had a negative impact on the materials sector. Historically, the time to increase exposure to materials is during a recession and we added several high-quality names that were out of favor between the first and second quarters. However, a number of those names performed extremely well, so we exited our positions in the third quarter as valuations became more reasonable. Our focus is mainly on high-quality companies that offer particularly attractive valuations and are more highly correlated to staples-like industries and secular growth trends, but we also have exposure to metals and mining companies as well.

We eliminated our position in Kirkland Lake Gold. The stock has done well and provided solid exposure to real commodities, but we chose to move on after strong performance to reallocate to names with greater upside potential.
We added a position in Lundin Mining, a Canadian base metals miner mainly focused on copper. As the best conductor of electricity, we think the demand for copper will remain strong for the foreseeable future given the growing electrification of the world driven by technology (electric vehicles, charging stations, power generation, etc.). We think it is beneficial to have exposure to metals with strong demand and an improving cost curve.

31-Dec-2020 - Scott Berg, Portfolio Manager,

We initiated a position in AvalonBay Communities, the second-largest apartment REIT in the U.S. We think AvalonBay has a very high-quality portfolio of assets focused on urban and transit-oriented suburban areas on the East and West Coasts with a significant moat due to the company's experience, construction footprint, and financial strength. Although the stock rallied following Pfizer's positive vaccine announcement in early November, we think AvalonBay is well positioned for growth on the other side of the pandemic.
We initiated a position in Zoom Video Communications. This is a name we owned at the beginning of the year and sold after strong performance at the start of the pandemic. More recently, the stock pulled back amid the early rollout of the coronavirus vaccines, which investors feared would reduce demand for video conferencing services. However, we still think the company has room to grow internationally as the world moves to a hybrid work model on the other side of the coronavirus pandemic. In our view, Zoom Video Communications remains a long-term secular winner with a substantial growth runway.
Lundin Mining is a Canadian base metals miner mainly focused on copper. We eliminated our position in the wake of management's annual three-year guidance release, which came in below our expectations. We also believe the stock is trading near the top of its near-term range, so we elected to move on from our position.
Boliden is a zinc and copper mining and smelting company that we believe ranks among the highest-quality names in diversified metals and mining. The company has a strong management team that understands how to create value by investing countercyclically, keeping leverage low, using automation and technology to lower costs, and dampening volatility with an integrated smelting business. Shares rose in conjunction with zinc and copper prices. However, with these metals trading at cyclical highs, we eliminated our position on reduced near-term upside.
Hilton Worldwide and Marriott International benefited from positive vaccine news and a continued strong cyclical recovery in the broader market. With shares trading at elevated levels, we eliminated our positions. In our view, the stocks face a wide range of outcomes given the potential for a structural impairment in travel that lasts beyond the coronavirus pandemic.

31-Dec-2020 - Scott Berg, Portfolio Manager,

Private Indian bank Kotak Mahindra Bank gained ground on strong earninargs results, with improving asset quality and fee income amid a backdrop of continued economic recovery in India. We think Kotak Mahindra Bank is one of the highest-quality banks in India led by a solid management team, with a strong underwriting culture and a transparent and disciplined loan mix.
Shares of Morgan Stanley climbed after positive vaccine news renewed faith in a return to economic normalcy. The company also benefited from its finalized acquisition of E*TRADE Financial and pending acquisition of Eaton Vance, while the Federal Reserve's authorization of buybacks following positive stress test results was another encouraging development. We think Morgan Stanley has resilient underlying business segments in wealth management and investment management that should help the firm weather the storm from the coronavirus and offset headwinds from lower interest rates, market volatility, and loan loss provisions. Ultimately, we think Morgan Stanley's high-quality franchise will continue to drive earnings growth over the long term.
China Resources Beer, the largest beer company in China, rose as life-and economic growth-has largely returned to normal in the region, which has helped support sales growth and profitability. The firm has also been successful in implementing a number of cost control measures and improving margins. We think China Resources Beer represents a compelling play on China's demographic growth, and�we believe the firm's focus on upgrading its product mix to more premium offerings should provide another lever for growth.
China Resources Mixc Lifestyle Services is a Chinese property management company of both residential and commercial real estate and operates a number of high-end shopping malls. Shares spiked following the firm's initial public offering on positive sentiment as China is returning to normal and demand within the sector is rising. We think the company has an attractive, asset-light business model and stands to benefit from China's rising consumption growth.

Benchmark Data Source: MSCI. MSCI index returns are shown with reinvestment of dividends after the deduction of withholding taxes. MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Past performance is not a reliable indicator of future performance.

Source for performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures.

Daily performance data is based on the latest available NAV.

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Please note that the Fund typically has a risk of high volatility.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

Industrials and Business Services

Financials

Consumer Discretionary

Materials

Risks

Typical Investor

Commentary for