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SICAV

Global Value Equity Fund

Targeting attractively valued global companies with prospects for improving earnings growth.

ISIN LU1382644596 Bloomberg TRGVEIE:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.96%
$39.9m

1YR Return
(View Total Returns)

Manager Tenure

11.30%
3yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

-1.10
2.95%

Inception Date 16-Mar-2016

Performance figures calculated in EUR

Other Literature

31-Oct-2019 - Sebastien Mallet, Portfolio Manager,
The underlying economic picture remains reasonable in the U.S., fuelled by higher government spending, strong private consumption, and an ever-tightening labour market. While this should underpin corporate earnings, extended uncertainty around trade relations with China and broader concerns about lower global growth remain headwinds. Overall, we retain a gently positive outlook for global equities and continue to concentrate on selecting companies with strong free cash flow generation not yet fully appreciated by the market.
Sebastien Mallet
Sebastien Mallet, Portfolio Manager

Sebastien Mallet is a portfolio manager in the Equity Division at T. Rowe Price, managing the Institutional Global Value Strategy. Mr. Mallet is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Global developed markets are reacquainting themselves with volatility. In many ways, the return of equity market volatility is welcome after what has been an abnormally long period of calm, reflecting the recognition that the world economy and its monetary policies are normalizing. The key question is how the economic cycle will develop from here, and what that means for value investors such as ourselves. Widening valuation spreads create some attractive opportunities for value investors in the short term. The sustainability of the trend toward value stocks, which we have witnessed in recent weeks, remains to be seen but certainly provides some evidence that headwinds to a world where value outperforms growth are dissipating and that valuations are regaining importance.

The underlying economic picture remains reasonable in the U.S., fueled by higher government spending, strong private consumption, and an ever-tightening labor market, where unemployment is at record lows. While this should underpin corporate earnings this year, there are also headwinds. Extended uncertainty around trade relations with China continue to weigh on business confidence and activity, while broader concerns about lower global growth also cloud the outlook.

Developed Europe is enjoying a small growth revival, driven by solid household spending, as unemployment falls and wages rise. In the medium term, growth is likely to be stable but slower amid a less favorable external environment. However, should global trade tensions calm and energy prices remain low, prospects could improve significantly, and we find good value by being selective. In the UK, the major downside risk is Brexit, and growth now hinges on its outcome. The October 31 deadline for Britain's departure from the EU is fast-approaching, but much is still uncertain.

In Asia, the Bank of Japan continues its ultra-loose monetary policy. Combined with tight labor markets, this creates a conducive backdrop for equities. As for other major economies, trade tensions and a weak global backdrop remain a risk to Japan's outlook, especially given the importance of its export sector. Crucially for investors such as ourselves, corporate governance is improving with companies becoming more shareholder friendly and we continue to identify stocks with compelling valuations befitting of our value perspective.

Despite some risks, we see enough upside to retain a gently positive outlook for global equity markets and continue to concentrate on selecting companies with strong free cash flow generation not yet fully appreciated by the market and with the scope to increase shareholder returns. We are finding many pockets of controversy where fundamentally sound, well-run businesses face unwarranted investor skepticism. Given our robust research platform and collective experience, we are confident in our ability to find these unique opportunities before their potential for substantial prosperity becomes obvious to other investors.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a widely diversified portfolio of undervalued stocks of companies anywhere in the world, including emerging markets.

Investment Approach

  • Diversified portfolio investing in companies located throughout the globe.
  • Emphasize attractively valued companies with prospects for improving earnings growth.
  • Employ rigorous and comprehensive research to identify and assess investment opportunities.
  • Allocate country and sector positions through consideration of:
    • Attractiveness of individual investments
    • Macroeconomic environment

Portfolio Construction

  • Typically 80-100 stock portfolio
  • Individual positions typically range from 0.30% to 3.00% — average position size of 1.00%
  • Country and sector weights generally range +/- 15% deviation from the benchmark
  • Maximum of 10% in emerging markets
  • Reserves range from 0% to 10%

Performance (Class I | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 11.30% 7.96% N/A 8.40%
Indicative Benchmark % 14.45% 11.20% N/A 11.18%
Excess Return % -3.15% -3.24% N/A -2.78%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI World Index Net

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 5.95% 8.23% N/A 8.49%
Indicative Benchmark % 8.49% 11.33% N/A 11.40%
Excess Return % -2.54% -3.10% N/A -2.91%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI World Index Net

Data as of  30-Sep-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 18-Nov-2019 Quarter to DateData as of 18-Nov-2019 Year to DateData as of 18-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % 3.43% 3.82% 25.89% 0.37% 3.08%
Indicative Benchmark % 3.14% 3.35% 27.45% 0.21% 2.38%
Excess Return % 0.29% 0.47% -1.56% 0.16% 0.70%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI World Index Net

Indicative Benchmark: MSCI World Index Net

Performance figures calculated in EUR

Past performance is not a reliable indicator of future performance.  Source for fund 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. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

31-Oct-2019 - Sebastien Mallet, Portfolio Manager,
In October, global equity markets rose, building on the previous month’s gains. The month got off to a weak start, with investors concerned by weak manufacturing data out of the U.S., signs of a slowing in German economic activity, and reports that the Trump administration was considering restrictions on U.S. investments in Chinese companies and financial markets. However, confidence soon returned on signs of progress in U.S -China trade negotiations as well as some prominent upside earnings surprises at the start of the results season on Wall Street. Much better-than-expected U.S. jobs data further fuelled market enthusiasm. At the portfolio level, our selection of stocks within the consumer discretionary and financials sectors was the most significant source of relative performance in October. This was due in particular to a sharp share price rise from a UK-based online apparel retailer following its quarterly results and solid performance from a number of U.S. bank holdings, including JPMorgan Chase and Bank of America. By contrast, the portfolio’s overweight to and stock selection within utilities held back relative returns.

Holdings

Total
Holdings
93
Largest Holding JPMorgan Chase 2.98% Was (30-Jun-2019) 2.54%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 21.77% View Top 10 Holdings Monthly data as of 31-Oct-2019

Largest Top Contributor^

JPMorgan Chase
By 0.41%
% of fund 2.97%

Largest Top Detractor^

GE
By -0.08%
% of fund 1.75%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Edison International (N)
1.12%
Was (30-Jun-2019) 0.00%

Top Sale

Verizon Communications (E)
0.00%
Was (30-Jun-2019) 1.96%

Quarterly Data as of 30-Sep-2019

30-Sep-2019 - Sebastien Mallet, Portfolio Manager,

Our major overweight sector positions at the end of September were financials and utilities. The largest underweight sector positions included consumer discretionary, communication services, IT, and consumer staples.

Over the course of the third quarter, we continued to identify new opportunities in utilities and real estate, increasing our overall weightings to both sectors. We initiated a position in a parcel delivery company, which resulted in a larger overall exposure to the broad industrials and business services sector. Having entered the quarter with an overweight stance in the health care sector, we moved to underweight as a result of our concerns regarding revenue concentration in one of the portfolio's major holdings. We moved further underweight consumer staples as a result of what we believe are increased headwinds within the tobacco industry. Within the IT sector, we retained our underweight but, within this, made a number of switches to our holdings.

Utilities

Utilities is our second-largest relative overweight position within the portfolio, and over the course of the review period, we continued to find compelling investment opportunities within the space, particularly among U.S.-based companies. For example, we recently initiated a position in�Edison International, the�predominantly transmission and distribution (T&D)-focused utility company, which is based in California. The stock appears undervalued by the market and has an attractive dividend yield. We are of the view that the thesis could improve over time if potential legislation to reduce wildfire risk is passed, as there is a meaningful amount of future capital deployment for grid modernization and wildfire hardening.

Real Estate

In the second quarter of 2019, we closed the portfolio's underweight to real estate, moving to a broadly neutral stance. Continuing this trend, we further raised the portfolio's exposure to this sector over the third quarter of this year as a result of what we believe are evolving opportunities in the space. For example, we built a position in real estate company Prologis, which is a major owner of industrial real estate and operates primarily in Southern California, Chicago, New Jersey, and New York. This blue chip company is compounding earnings and has an excellent balance sheet and a world-class management team. Over the next several years, we believe that rental revenue growth should exceed expectations as supply chains receive an increasing share of corporate budgets.

Health Care

Having reduced the portfolio's exposure to health care last quarter (largely due to concerns around the managed care space), in this most recent quarter we further cut the extent of our positions and are now modestly underweight. This was primarily the result of exiting our holding in Merck. We have concerns over revenue concentration at this large health care company, given the focus on one specific product and limited pipeline opportunities. This is likely to constrain valuation and makes the company more vulnerable to competition.

Consumer Staples

We made the decision to sell out of Philip Morris, the multinational cigarette and tobacco manufacturing company, which sells products in over 180 countries. In our view, the company faces headwinds as it becomes increasingly difficult to offset the decline in volume growth with pricing. As a result of this sale, the portfolio moved further underweight the consumer staples sector.

IT

The portfolio is underweight the IT sector, and over the course of the review period, our overall weighting remained broadly unchanged. However, within the sector, we made a number of switches as new opportunities emerged and relative valuations shifted. For example, we initiated a position in TE Connectivity, funding this in part by reducing the size of our position in Microsoft.

  • TE Connectivity designs and manufactures connectivity and sensor products for a variety of industries. The stock has been out of favor on cyclical concerns, but connector sales are expected to grow, and the company is likely to be able to increase market share in the automotive sensor segment.
  • Microsoft: We reduced our holding in the world's dominant software provider, primarily due to the valuation beginning to look full. In addition, the company's sizable and secularly challenged Windows client operating systems business likely precludes sustainably faster growth, carries risk, and constrains the multiples the stock merits.

Industrials and Business Services

Within the industrials and business services sector, we made a new addition to the portfolio over the quarter in the form of United Parcel Services (UPS). We purchased shares in this parcel delivery service company as we believe that UPS is making the required changes to address the unprofitability in business-to-consumer (B2C) volumes. In our view, this should arrest the domestic margin decline and provide a free call option on improvement.� We funded this purchase in part through eliminating the portfolio's holding in Verizon Communications (classified within the communication services sector), the largest U.S. wireless operator. In our view, the business has now limited midterm fundamental upside and low free cash flow growth, and there is significant potential for increased competition in the wireless space.

Sectors

Total
Sectors
11
Largest Sector Financials 24.44% Was (30-Sep-2019) 24.94%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: MSCI World Index

Top Contributor^

Utilities
Net Contribution 0.64%
Sector
0.34%
Selection 0.30%

Top Detractor^

Consumer Staples
Net Contribution -0.27%
Sector
-0.07%
Selection
-0.20%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Financials
By8.74%
Fund 24.44%
Indicative Benchmark 15.70%

Largest Underweight

Consumer Discretionary
By-6.24%
Fund 4.26%
Indicative Benchmark 10.50%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Sebastien Mallet, Portfolio Manager,
Financials and utilities remain the portfolio’s largest relative overweight positions while key underweights are consumer discretionary, information technology (IT), and communication services. In October, we initiated a holding within the health care space, building a position in a large biopharmaceutical company ahead of it reporting its latest quarterly results. We feel that investor concerns on the uncertainty around its key blockbuster drug have been overdone and that the company’s recently announced acquisition of a large rival could help mitigate some of these negative effects by diversifying the revenue base.

Regions

Total
Regions
4
Largest Region North America 59.45% Was (30-Sep-2019) 60.45%
Other View complete Region Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: MSCI World Index

Top Contributor^

United States
Net Contribution 0.75%
Region
-0.05%
Selection 0.80%

Top Detractor^

Japan
Net Contribution -0.09%
Region
0.01%
Selection
-0.10%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Europe
By3.40%
Fund 24.66%
Indicative Benchmark 21.26%

Largest Underweight

North America
By-6.55%
Fund 59.45%
Indicative Benchmark 66.00%

Monthly Data as of 31-Oct-2019

Countries

Total
Countries
20
Largest Country United States 55.02% Was (30-Sep-2019) 55.87%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: MSCI World Index

Largest Overweight

China
By3.30%
Fund 3.32%
Indicative Benchmark 0.02%

Largest Underweight

United States
By-7.59%
Fund 55.02%
Indicative Benchmark 62.61%

Monthly Data as of 31-Oct-2019

Team (As of 31-Aug-2019)

Sebastien Mallet

Sebastien Mallet is a portfolio manager in the Equity Division at T. Rowe Price, managing the Institutional Global Value Strategy. Mr. Mallet is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Mallet has 19 years of investment experience, 14 of which have been at T. Rowe Price. Prior to joining the firm in 2005, he was a telecom banker at Credit Suisse First Boston in the Tokyo and London offices. Mr. Mallet started his career as a financial analyst with France Telecom, based in Guangzhou, China, and Madrid, Spain.

Mr. Mallet earned an M.A., with honours, in finance from the University of Paris and an M.B.A. from the London Business School.

  • Fund manager
    since
    2016
  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    18

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 160 basis points 1.77%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 0.85%
Class Q $15,000 $100 $100 0.00% 75 basis points 0.92%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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