WQG annual outperformance extends to over 12% | WCM Quality Global Growth NTA & Portfolio Update

We are pleased to report the portfolio outperformed the broader market over May when global markets experienced significant declines. WQG and WCMQ both outperformed the benchmark MSCI All Country World (ex-Australia) Gross Total Return Index by over 3%, The decline in the value of the portfolio was limited to only 1.2% and 1.3% respectively versus the 4.4% decline in the benchmark index. The performance of the two vehicles may vary slightly over the short term but over the medium and long term will share a strong positive correlation.

The portfolio has delivered returns in excess of the benchmark over the previous one, three, six and 12 months.

Global equity markets experienced very difficult conditions in May. The deterioration in the trade dispute between the US and China dominated headlines and had a material negative impact on market sentiment. However, it was the sharp decline in long-term US interest rates and the cautious signal this sends on the outlook for economic growth that arguably caused most concern for investors.

At a regional level, Asia (ex Japan) was weakest followed by the Eurozone. In terms of sectors, it was those most exposed to a potential slowdown in economic growth which were hardest hit. These included basic materials and energy – two sectors in which the portfolio is underweight. Conversely the more economically defensive sectors such as healthcare and utilities outperformed during the month. Healthcare is the portfolio’s largest exposure, while the portfolio is underweight utilities.

WQG vs ASX sector weightings

WCM Global Growth Limited at 31 May 2019 vs SSGA SPDR® S&P®/ASX 200 Fund. The SSGA SPDR® S&P®/ASX 200 Fund is a passive fund which aims to closely track the performance of the S&P®/ASX 200 Index. For more information on the S&P®/ASX 200 Index www.asx.com.au.

Despite the weaker market backdrop, several portfolio holdings delivered strong positive returns during the month. These included ecommerce specialists Shopify and MercadoLibre, and Indian private bank HDFC Bank. Chinese internet services company Tencent, global oil services firm Schlumberger and Taiwan Semiconductor were amongst the holdings that weighed most heavily on performance.

The strong relative performance of the portfolio in May further provides further evidence of its favourable ‘downside capture’ attribute. The downside capture ratio is a statistical measure of a portfolio’s performance in down-markets. When the ratio is less than 100 it indicates that the portfolio has lost less than the market in periods when the market has declined. By way of example a downside capture ratio of 70 would indicate that when markets decline by 10% the portfolio has on average declined by only 7%. The downside capture ratio for the underlying Quality Global Growth strategy (QGG) since inception (March 2008) to March 2019 has been 59%*.

WCM Quality Global Growth strategy downside capture since inception.

WCM Quality Global Growth Downside capture is 59%
As at 31 March 2019.

Source: WCM Investment Management, prepared by Contango Asset Management Limited. Notes: *Chart refers to the underlying WCM Quality Global Growth (QGG) investment strategy. The QGG composite is a representative portfolio containing fully discretionary equity accounts with a minimum account size of $1 million USD in equities. Prior to 1 Jan 2014 there was no minimum account size for this composite. Specific account holdings may vary due to size or other restrictions. Past performance is not a reliable indication of future performance.