Premier Ethical Fund Fund update | First quarter 2020 - Premier Asset Management
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Premier
Ethical Fund
Fund update | First quarter 2020
FOR INVESTMENT PROFESSIONALS ONLY.
NOT FOR DISTRIBUTION TO RETAIL CLIENTS
Q1 2020
Premier Ethical Fund
Need to know Contents
Aims to achieve capital growth over the long term by seeking to focus on 3 Performance summary
companies with a positive societal footprint
4 Equity market analysis
Focused on those companies contributing to the requirements of a civilised
society and whose products/services are of widespread benefit to the 5 Performance drivers - asset allocation
community. 6 Performance drivers - holdings
Looks to avoid investing in those companies with products or services that may
7 Example holding and its ethical criteria
have a negative social and environmental effect.
Mainly invests in UK equities. 8 Activity - holdings
Independent committee oversees the ethical policy of the fund and works with 9 The complete portfolio
the fund manager to ensure the portfolio remains aligned with this policy.
10 General investment risks
The fund invests in UK companies which reflect the fund’s ethical credentials,
and we believe the FTSE4Good Index, is a useful performance comparator. As
the fund invests in UK companies we also believe the FTSE All-Share Index is a
useful performance comparator.
Jon Hudson Benji Dawes
Co-manager Co-manager
2Premier Ethical Fund
Performance summary
— While it is disappointing to underperform the comparative Quarter ending 31.03.2020
index over the quarter, in periods of market stress it is
inevitable that lower liquidity amongst smaller companies, Premier Ethical Fund
to which the fund has a relatively higher weighting, will 0 FTSE4Good UK Index
result in greater markdowns. We see this as a temporary
dividends reinvested (%)
FTSE All-Share Index
phenomenon. Given the operational resilience and balance -5
sheet strength of our companies, we believe it has created
-10
Total return
some very attractive buying opportunities. We have not been
idle and taken advantage of these, selectively. -15
— Given the nature of the current crisis, it will take time before -20
there is clarity for companies’ outlooks, and there will be
winners and losers. This provides a lot of opportunites for -25
active managers like ourselves.
-30
— We have already been vindicated in some of our actions, as
we have seen encouraging updates from a number of our
portfolio companies over the past week. These include Just Calendar years
Eat Takeaway, Caretech, SDL, Sumo and Boohoo. Boohoo,
remarkably, generated sales growth despite the lockdown, a
testament to the agility of their business model. It looks well 40%
placed to come out of the disruption in an even stronger
2020 YTD
30%
dividends reinvested (%)
position relative to its competitors.
20%
2018
Total return
Source: FE Analytics. Based on a bid to bid, total return (net income reinvested), 10%
net of fees, UK Sterling basis, based on class C income shares. Data to 31.03.2020. On
20 January 2020, this fund moved from a single pricing basis (mid) to a swing pricing 0%
basis, which is where the price can swing to either a bid or an offer basis depending
2016
2017
2015
-10%
2019
on the investment and redemption activity in the fund. This means the investor selling
or buying fund shares bears the associated [dis]investment costs and protects the -20%
continuing holders in the fund. Performance could be shown on a combination of bid,
mid or offer prices, depending on the period of reporting. Performance is shown net -30%
of fees with income reinvested. Past performance is not a guide to future returns and
there is a risk of loss to capital.
-40%
3Q1 2020
Equity market analysis
— The effects from the COVID-19 outbreak that impacted Index total returns -
markets in February, continued into March. With global
economic activity grinding to a halt, as governments attempt
quarter ending 31.03.20201
to stem the flow of the outbreak, huge levels of fiscal and
monetary stimulus have been enacted to ease the impact. UK large caps -23.8%
However, it is now inevitable that unemployment will rise, a
number companies will become insolvent and an economic UK equities -25.1%
recovery could take some time.
UK mid caps -30.7%
— Policy makers are having to balance their actions against
the risk of the continuing spread of the disease The range of
UK small caps -32.4%
outcomes is therefore wide. Having said that, the substantial
policy response, in particular through continued provision of -40% -30% -20% -10% 0%
liquidity to households as well as to the corporate sector, has
been crucial in thus far averting a more severe credit crisis.
— With the biggest economic collapse for decades in progress, Sector total returns -
it is inevitable that there will be a significant hit to company
profit forecasts. Detailed analysis at the company level is quarter ending 31.03.20202
required, assessing balance sheet strength, supply chain
Utilities -7.5%
resilience and elasticity of consumer demand. Diligent, active
Health care -9.2%
management is likely to be rewarded, whilst complacency
Cons umer goods -16.0%
will likely be punished.
Basic materials -22.1%
1
Source: FE Analytics. Based on a bid to bid, total return (net income reinvested), UK Industrials -25.8%
Sterling basis. Indices: FTSE Small Cap (ex IT) (UK small caps), FTSE 250 (UK mid caps),
Technology -27.3%
FTSE 100 (UK large caps), FTSE All-Share (UK equities).
2
Based on bid to bid, total return (net income reinvested), UK Sterling basis. Comparative Telecommunication s -27.7%
index is FTSE All-Share index. Data to 31.03.2020. The FTSE All-Share index is now being Financ ials -30.9%
used in this report to show the performance and relative portoflio weights of sectors
Cons umer servic es -31.3%
and sub indicies. The FTSE All-Share index is the broadest representation of the UK
stockmarket. The FTSE4Good UK index remains the funds comparative performance Oil & gas -37.4%
index. Past performance is not a guide to future returns.
-40% -30% -20% -10% 0%
4Premier Ethical Fund
Performance drivers - asset allocation
Fund breakdown at end of quarter (31.03.2020) Relative to FTSE All-Share index:
Helped
— Overweight video gaming companies
— Underweight oil & mining companies
Hurt
— Overweight small and mid cap companies
Consumer services 23.1%
— Underweight US dollar earning companies
Financials 21.3%
Consumer goods 18.5%
Health care 14.2%
Technology 11.1%
Industrials 6.3%
Basic materials 0.6%
Underweight / overweight Index
Cash & other 5.1%
as at 31.03.2020
Consumer services 10.1%
Technology 9.9%
Consumer goods 4.8%
Health care -0.3%
Industrials -2.4%
Financials -2.4%
Telecommunications -3.1%
Utilities -5.1%
Basic materials -8.1%
Comparative index is FTSE All-Share index. Data as at 31.03.2020. Please note that Oil & gas -8.5%
the numbers above have been rounded.
-10% 0% 10% 20%
5Q1 2020
Performance drivers
Notable contributors Notable detractors
Frontier Developments Dart Group
The video game developer held up well, as video gaming Shares fell significantly as it has been forced to ground
surges around the world under lockdown. its aircraft due to travel restrictions imposed by European
governments. Despite having the best balance sheet out of
Just Eat Takeaway its peers, the sector will face serious financial difficulty if the
Has seen new customer numbers grow under the lockdown. virus is prolonged and without government support.
Hikma
The Gym Group
The generic drug-maker performed well, as it has a high
The Gym Group’s gyms are currently closed. However, it now
quality supply chain in the US and its drugs remain in high
has capital in place that could weather a two year lockdown.
demand.
It now offers its members the UK’s leading home fitness app.
Vectura
Another of the fund’s holdings whose revenues should be
relatively unaffected by COVID-19. Vectura designs inhalers
to make sure the right dosage of drug is administered to the
patient and its products are currently used by over 9 million
patients worldwide.
6Premier Ethical Fund
ESG in action
Companies’ responses demonstrating strong stakeholder responsibilities
— Bellway’s Board of Directors have decided to take a temporary 20% salary reduction during the COVID-19 outbreak and
donate the savings to charity.
— Caretech have launched a special fund, allocating up to £1m to staff and service users adversely affected by the coronavirus
pandemic.
— Puretech’s ADHD treatment app has been made available early in the US to help children suffering from the disorder under
lockdown conditions
— Boohoo are using their supplier base to donate PPE to the NHS and have also signed up to the Sustainable Clothing Action
Plan (SCAP) and the Sustainable Apparel Coalition (SAC) demonstrating an encouraging step in the right direction.
— Tesco has offered 12 weeks of paid leave to those who fall into an “immunocompromised” category, such as employees over
the age of 70, pregnant or indicating underlying health conditions.
7Q1 2020
Activity - holdings
Key purchases Key sales
— Just Eat Takeaway — Just Eat
— Tesco — Redrow
— Nacon — Dart
— Vectura — Forterra
— Hikma Pharmaceuticals — The Gym Group
8Premier Ethical Fund
The complete portfolio
Cash & other 5.1%
Basic materials 0.6%
Cash & other Consumer services
Industrials 6.3%
Cash (5.1%) Consumer services 23.1% Just Eat Takeaway (3.4%)
B & M European Value Retail (3.3%)
Basic materials Technology 11.1% Moneysupermarket.Com (2.9%)
Sylvania Platinum (0.6%) Dart (2.2%)
The Gym Group (2.2%)
Industrials CVS (2.1%)
Experian (1.6%) Boohoo Group (2.1%)
Pagegroup (1.3%) Tesco (1.4%)
Health care 14.2%
Marlowe (1.2%) Trainline (1.1%)
Financials 21.3%
Forterra (1.2%) Fuller Smith & Turner ‘A’ (0.9%)
Gateley (1.0%) Informa (0.8%)
JD Sports Fashion (0.6%)
Technology Consumer goods 18.5%
Spirent Communications (2.9%) Financials
NCC (2.4%) Consumer goods Sirius Real Estate (3.0%)
Stmicroelectronics (2.1%) Frontier Developments (3.7%) Legal & General (3.0%)
FDM Group (2.0%) Unilever (3.4%) John Laing (3.0%)
SDL (0.8%) Sumo Group (3.2%) Prudential (2.4%)
Dotdigital (0.8%) Games Workshop (3.2%) Segro (2.3%)
Bellway (2.9%) Alpha FX (1.8%)
Health care
Nacon (1.3%) Liontrust Asset Management (1.7%)
Hikma Pharmaceuticals (4.0%)
Countryside Properties (0.9%) Argentex (1.4%)
GlaxoSmithKline (3.9%)
Vectura (2.4%) Workspace (1.0%)
Caretech Holdings (2.2%) Purplebricks (0.7%)
Medica (1.1%) Onesavings Bank (0.6%)
Puretech Health (0.6%) Mortgage Advice Bureau (0.2%)
Data as at 31.03.2020. Please note that the asset allocation may be above or below 100% due to rounding. Holdings below 0.1% are not shown.
9Q1 2020
General investment risks
All types of investment carry a degree of risk. It is possible you could Fund specific risks
lose some, or all, of the money you invest. The level of risk varies Some of the main specific risks of investing in this fund are
depending on the type of investment. summarised here. Further detail is available in the prospectus for
the fund.
Typically, you are less likely to lose money over the long term from
an investment that is considered low risk, although potential Currency
returns may also be lower. Investments considered higher risk Where investments in a fund are denominated in currencies other
typically offer greater opportunities for better long-term returns, than sterling (for example, if a fund holds assets priced in euros), its
though the risk of losing money is also likely to be higher. value will be affected by changes in the relevant exchange rate. Certain
other investments, such as the shares in companies with profits from
When you invest, it is important that you understand the risk to your other countries, will also be effected.
money and are comfortable with that level of risk. If you are unsure,
we would recommend that you consult a financial adviser. Equities
Equities (shares) can experience high levels of price fluctuation.
Past performance of a fund is not an indication of how it will
perform in the future. The share price of funds, therefore the value Geographic concentration
of your investment in the funds, and any income from them, can go Funds that have a strong focus on a particular country or region can
down as well as up, and you could get back less than you invested. carry a higher risk than funds with a more diversified portfolio.
The value of your investment might not keep up with any rise in the Inflation
cost of living. Higher inflation can lead to some investments falling in value,
particularly those with a fixed level of interest, for example
You could lose money if financial markets fall. government bonds and corporate bonds.
There is no guarantee that the investment objective of the fund will Infrastructure
be achieved. Investments are often in large-scale projects whose profitability can
The levels of taxation that apply to income or capital gains from the be affected by supply problems or rising prices for raw materials or
fund, including any tax relief that may be available, will depend on natural resources. Changes in the wider economy and government
your personal tax situation. regulation can also have a significant influence.
Funds with similar objectives may not perform in the same way as Interest rate
they are likely to have different holdings. Changes in central bank interest rates can affect all types of assets,
in particular, securities such as government bonds and corporate
Fund performance will be affected by investment decisions made bonds that generally offer a fixed level of interest. If interest rates go
by the fund manager. up, the value of a bond may fall, and vice versa.
10Premier Ethical Fund
General investment risks (continued)
Legal/Tax
The income or capital gains from investments can sometimes be
affected by changes in legal and tax regulations or how these rules
are applied.
Liquidity
In some instances, for example, when market conditions generally
are difficult, holdings in a fund may be difficult to sell and buy at
the desired price. The fund value could fall as a result.
Operational
Processes, systems and controls around your investment might fail.
The more complex or unusual the investments that the fund holds,
the more likely this is to happen. For example, developing markets
may have less reliable systems or lower standards of governance
than more developed markets.
Smaller companies
Investment in smaller companies is typically higher risk than
investment in larger companies. Shares in smaller companies can
experience greater levels of volatility.
11Important information Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice. Reference to any particular stock does not constitute a recommendation to buy or sell the stock. All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document. A free, English language copy of the Fund’s full prospectus, the Key Investor Information Document and Supplementary Information Document, are available on the Premier Miton website, or you can request copies by calling us on 01483 306090. For your protection, calls may be monitored and recorded for training and quality assurance purposes. Awards and ratings: The Defaqto 2020 Diamond Rating is based on the class C shares for the Fund. Defaqto is an independent researcher of financial products and is not authorised to provide financial advice. We do not have any influence or control over the Defaqto Diamond Ratings or the methodology used to create them. We are therefore unable to guarantee their accuracy or that these will not change in the future, or that we will continue to use Defaqto ratings in the future. Morningstar ratings do not constitute investment advice. Copyright © 2020 Morningstar. All Rights Reserved. The methodology and calculations used by the companies or organisations that provide the fund or fund manager awards and ratings are not verified by us and we therefore are unable to accept responsibility for their accuracy. Ratings and awards should not be relied upon for making an investment decision, nor are they an indication, promise or guarantee of future performance of a fund or fund manager. Source: FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. Issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Miton Asset Management Limited is registered in England no. 01949322. Miton Trust Managers Limited is registered in England no. 04569694. All these companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office for Premier Portfolio Managers Limited, Premier Fund Managers Limited and Premier Miton Group plc: Eastgate Court, High Street, Guildford, Surrey GU1 3DE. Registered office for Miton Asset Management Limited and Miton Trust Managers Limited: 6th Floor, Paternoster House, 65 St. Paul’s Churchyard, London EC4M 8AB. For more information: 0333 456 9033 premiermiton.com 30042017109
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