- Our Shariah compliant ETF will invest in companies of a high quality with wide economic
moats
- The fund will take active positions against the MSCI World Index (the index) with typically 30
positions against the index’s 400 constituents
-
Historically a selection of high-quality businesses managed with a
rigorous valuation discipline has managed to outperform the index over time based on the investment team’s
Almalia Sanlam Active Shariah Global Equity Performance
Review
Monthly Performance of Fund/Sector
In October the fund’s
net asset value decreased by 5.9% versus the market’s return of -4.9% in Dollar
terms. This was the first month for the strategy and we were able to populate
the Shariah compliant ETF with high quality businesses which should be able to add significant
shareholder value over time. The fund
has a broad geographic split from around the world and currently has 24
positions against the index with roughly 400 constituents. The average return
on equity for our portfolio is 16% and the average operating margins are 16%
which we believe lay a solid foundation for future returns given the
portfolio’s 4.2% average free cash flow yield.
What Has Driven This Performance?
Our top performer during the
month of October was Corteva (+14.6%). Corteva’s
(CTVA) results for the last quarter pleased the market with corporate expense
at $27M lower than the street's forecast $31M. While the lowered corporate
expense is hardly needle-moving, it does suggest CTVA is controlling costs,
which is of particular importance post their split into an independently listed
business since May last year. The company's cost cutting efforts in general
seems to be paying off, and an additional $250mln is expected in the 2021
fiscal year.
Japanese prestige cosmetics
company Shiseido also performed well during the month, returning 7.9%. Shiseido is the largest cosmetics manufacturer
of its Asian peers, and the number 3 player worldwide, with a strong foothold
in both its home market Japan, and China from which it obtains over 20% of its
revenue. The company will continue to expand
its presence in Asia and the Americas over time which will lead to strong
growth in free cash flow generation.
Constituents
Top 10 holdings
Company
|
Weight
|
Johnson & Johnson
|
7.0%
|
Novartis
|
5.4%
|
Roche
|
5.3%
|
Abbott Laboratories
|
5.2%
|
Philips
|
5.0%
|
Henkel
|
4.8%
|
Kao
|
4.8%
|
Medtronic
|
4.6%
|
Sage
|
4.6%
|
Sanofi
|
4.4%
|
Past performance is no guarantee of future
performance. Source: Sanlam Investments UK. Data as of
31/10/2020
Source: Bloomberg/ HANetf. Data as of 31/10/2020
Outlook
Investors
continue to favour the US equity market against other regions of the world. The
US market is up 2.8% in US$ year to date versus the rest of the world being
down by -10.8%. On a sector level, the difference in performance continues to
be rather significant with information technology names up by 21.2% in US$ year
to date and financials and energy stocks down by -22.1% and -48.2%
respectively. We continue to hold no
energy or financials exposures in the fund.
We also have not utilities in our portfolio as they do not pass our
stringent quality criteria and Shariah Screening process.
We
believe names Taylor Wimpey, Sage, Novartis and Inditex could recover
meaningfully for us over time even though most of these names are a drag on
performance in the short term. Our large position sizes in names like Johnson
and Johnson, Roche and Medtronic were off to a tough start in October but we
believe they will continue to deliver significant shareholder returns for
investors over time in line with their long-term history. We are comfortable
that our active position leads us naturally to an observation we are very
comfortable to explain to our investors.
In order to have investment results different to the index, you need to
be positioned very different to the index. We acknowledge that valuations in some
sectors are at multi decade lows but we prefer to focus on business quality and
attractive valuations, as opposed to purely statistically cheap
valuations. The market rarely offers
investors a free lunch and more than often cheap valuations are simply a
reflection of investors’ concerns on the underlying quality of the business.
Product Details
The
Almalia Sanlam Active Shariah Global Equity UCITS ETF is a UCITS compliant
exchange traded fund domiciled in Ireland.
The
fund aims to achieve capital growth over the medium to long term, whilst
complying with the Principles of Shariah Investment.
Our Shariah compliant ETF is an actively fund managed by Sanlam Investment Managers that invests
in best of class, high quality companies with strong growth prospects, durable
business models, sustainable revenue and free cash flow. It focuses on 20-35
companies with high returns on capital, low leverage, enduring businesses with
a sustainable competitive advantage that produce significant free cash flow
after capital expenditure.
Please
remember that when you trade ETFs your capital is at risk and past performance
is no guarantee of future performance.
Exchange |
Bloomberg Code |
RIC |
ISIN |
SEDOL |
Currency |
TER |
London Stock Exchange |
AMAL LN |
HAAMAL.L |
IE00BMYMHS24 |
BMDNKB0 |
USD |
0.99% |
London Stock Exchange |
AMAP LN |
AMAP.L |
IE00BMYMHS24 |
BMDNKC1 |
GBP |
0.99% |
Deutsche Boerse Xetra |
ASWE GY |
ASWE.DE |
IE00BMYMHS24 |
BMWTXV0 |
EUR |
0.99% |
Borsa Italiana |
AMAL IM |
AMAL.MI |
IE00BMYMHS24 |
BMWTXS7 |
EUR |
0.99% |
Click here to download our Shariah ETF Monthly Report