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Sarasin IE EquiSar - Global Thematic Fund (GBP) - News
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Fund Name Changed
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Monday, 10 October 2011
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Official Announcement
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The Sarasin CI EquiSar Sterling Global Thematic Fund will change it's name to Sarasin IE EquiSar - Global Thematic Fund (GBP), effective from 1 July 2011.
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Sarasin Sterling Global Thematic comment - Jun 11
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Wednesday, 21 September 2011
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Fund Manager Comment
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Escalating Greek tensions and increasing fears of a global slowdown hit the markets during the first half of June. However, signs of smoother Japanese supply chains, a further drop in oil prices after the IEA decided to release some oil reserves, more positive US manufacturing data and a short-term resolution of the Greek debt crisis provided some relief. Meanwhile, the US Federal Reserve ended its QE programme, while the ECB signalled its intention to hike rates for a second time this year in July. Conversely, the Bank of England moved away from an interest rate hike.
Performance was slightly behind the benchmark. Despite the economic backdrop, earnings expectations have held up well. Given divergence between earnings expectations and forward indicators such as the ISM, we have shifted the fund towards stocks with a higher degree of sustainability in their margins. A number of changes were made over the month, including the purchases of Danone, HJ Heinz, Wal-Mart and Time Warner, which were funded by sales of Holcim, China Life, Invensys and a general reduction of our cyclical industrial tilt. Within our Opportunity Sets there are a number of thematic stocks which can thrive in a slower growth environment. In many cases these are likely to have lower risk, higher quality earnings streams, and show value after sustained periods of de-rating.
In the absence of further stimulus, the environment does not favour our Pricing Power theme, and we have further reduced exposure to this cyclical characteristic over the month and quarter. Three of our themes are particularly well suited to identifying winners in this more moderate environment. Corporate Restructuring - with the ability to protect margins, but now with an added emphasis on balance sheet quality - should do well. Serial innovators identified in our Intellectual Property & Excellence theme are expected to provide sustainable growth, albeit at a valuation premium. Thirdly, companies with autonomous financing ability - Strong get Stronger - should finally be able to out perform credit-constrained peers. Indeed, each of these thematic trends was increasingly evident over the month/quarter, excepting some underperformance from the more cyclical elements in Strong get Stronger.
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Sarasin Sterling Global Thematic comment - Mar 11
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Wednesday, 25 May 2011
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Fund Manager Comment
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Despite an array of negative newsflow, markets have shown significant resilience after an initial sell off. With regard to ongoing discontent in North Africa/Middle East, the oil price has been a key driver of both positive and negative relative returns, but the portfolio as a whole is now somewhat agnostic to moves in the oil price. The catastrophic chain of events in Japan has had obvious effects on our Japanese equities (such as Tokio Marine and Mitsubishi Estate) and some ongoing effects to broader supply chains (particularly in the automotive and technology arenas) are inevitable. However, our overweight stance to the region has been benign in relative terms, due to stock selection and a slant towards overseas sales and producers. Thematically, the environment has suited the higher-quality growth stocks in our Intellectual Property & Excellence theme (such as Novozymes). Clearly, the geopolitical events have catalysed some of the optionality in our Security of Supply theme, and we have seen strong moves in Peabody, Statoil and SQM. Corporate Restructuring was the weakest theme, largely down to its Japanese exposure. The improvement in economic data, most notably recent US employment statistics, is a double-edged sword for markets. Although we do not expect aggressive policy reversal, it is difficult to analyse the extent to which QE has been supportive. An end to this particular stimulus looks inevitable. Japan's policy makers may go some way to replacing this shortfall, although we must be sure that accommodative policy and the BoJ's dovish stance is here to stay. Aside from shorter-term disruptions, we are keen on Japan as a cheap market with excellent earnings growth and further leverage to ongoing recovery. We have spent some time considering whether corporate profit margins are as high as they can go, with the conclusion that there is some small room for further expansion in the US, but possibly little room for expansion in Europe, particularly whilst interest rates are starting to go up. However, concern about margins may become opportunity, if geopolitical tensions start to fall and commodity prices moderate. In the short term risk appetite remains high, although there is still scope for earnings-driven appreciation of global markets after this period of consolidation.
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Sarasin Sterling Global Thematic comment - Dec 10
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Thursday, 24 February 2011
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Fund Manager Comment
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Equities continued to perform in December. Corporate Restructuring was the best performing theme over the period, driven by risk assets; Fiat, for instance, was strong as the company came closer to the split and separate listing of its auto and industrial components. Hartford Financial Services has also performed well, having surprised the market with earnings and boosted their 2010 earnings forecast. This stock has a high beta to the market as asset price rallies boost the value of their holdings and reduce liabilities to customers on equity-linked retirement products, but longer-term the business should be positively re-rated as they reorganise themselves around customers rather than products. Pricing Power and Intellectual Property & Excellence (IP&E) have also outperformed the market over the month, but not by such a large margin. Of particular note has been some of the more cyclical exposure in these themes, such as Foster Wheeler, Arcelormital, Borgwarner and ASML. Despite an exceptional performance from Schroders, Strong get Stronger has again been one of the weaker themes, with these companies viewed as under-geared and lacking growth by the market in the current environment. Strong get Stronger and Security of Supply remain the lowest weighted themes, the latter because it presently remains quite highly correlated with Pricing Power. There is currently a high degree of optimism, and a number of sentiment indicators point towards a consolidation in the near term. However, due to existing levels of monetary and fiscal stimulus we are positively disposed to equity markets, with a couple of reservations - namely, ongoing debt concerns and emerging market tightening. We expect the global economy to undergo a moderate but firm recovery. In particular, we expect US growth to surprise on upside. The environment should continue to support the more cyclical sectors, so we still favour selected industrials. Valuations could be described as fair, and we see room for earnings growth (perhaps 13% for S&P). The margin progression on the back of cost-cutting in the recession is likely to be sustained, although we remain alert to factors like higher energy and commodity prices, and bullish guidance may be more difficult to attain later in the year.
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Sarasin Sterling Global Thematic comment - Jun 10
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Thursday, 19 August 2010
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Fund Manager Comment
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Economic data and confidence have continued to deteriorate over the month. Indeed, the slowdown seems to be now evident outside of Europe, in both the US and China. Risk aversion has been broad based and markets are testing technical support, the breaking of which may bode poorly for equity returns in the near term. The portfolio has fallen in line with the market. Corporate Restructuring - where we have had only limited exposure - has been the poorest theme in relative terms over the period. This is not wholly unsurprising given the challenging environment, and somewhat higher risk nature of the companies it tends to include: Home Depot, Monster Worldwide and Weyerhaeuser have been amongst the weakest stocks in the portfolio. Pricing Power - which tends to be somewhat more cyclical in nature - has also had a tough month, and has cost the portfolio more because we have been overweight. Much of our Industrials exposure is held here and we have sustained double digit percentage losses in a number of these companies over the period, namely: General Cable, Delta, Foster Wheeler, Safeway and Arcelormittal - all of whom we feel will more than recoup their losses over coming quarters. The three remaining themes (Intellectual Property & Excellence, Security of Supply and Strong get Stronger) outperformed the market, but not by much. Of particular note has been Fanuc, a Japanese Robotics manufacturer in IP&E, which is benefiting from demand as wage increases are demanded by workers in China. European exporters with significant USD earnings exposure, such as BMW & EADS, have also been strong.
Outlook
Undoubtedly economic conditions have been deteriorating as the broad based global stimulus is removed. We are holding onto the view that we are currently near the most southerly border of a range bound market. Our analysts' earnings estimates as yet remain intact, although weakening (which is not uncommon midrecovery). The ultimate outcome of this is reflation, or possibly inflation, where only real assets anchored to long-term inexorable trends will retain their value.
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Sarasin Sterling Global Thematic comment - Mar 10
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Thursday, 27 May 2010
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Fund Manager Comment
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In both relative and absolute terms it has been a good month for investors. Corporate Restructuring was by far the strongest theme over the period, up more than twice as much as the market. Lloyds, Citigroup and Fiat were up more than 20% as investors became increasingly confident about the economic recovery. This positive sentiment also favoured the more cyclical characteristics in our Pricing Power theme, with Steel, Energy and other Materials related names amongst the best performers. We have also been pleased here by the performance of airline stocks, where we see significant pricing improvements on limited capacity additions. Naturally in this environment the more defensive, high quality characteristics of Strong get Stronger resulted in those companies lagging relatively. as did the higher multiple growth companies in Intellectual Property & Excellence, although it has been gratifying at last to see some performance from Nintendo in this theme.
Our thesis remains bullish, economies in recovery and the market reasonably priced - 2010 consensus is currently for $79 of earnings on S&P 500. reflecting a multiple of 15x and inflation so far seems in check. We do have two specific nuances to this view: genuine growth stocks such as those in our Strong get Stronger and Intellectual Property & Excellence themes, although somewhat more expensive can sustain yet higher premiums. Cyclical and risk related companies, more akin to those in our Corporate Restructuring and to some extent our Pricing Power and Security of Supply themes. are compelling long term but susceptible to sentiment swings hinged around the economic growth and perceived interest rate trajectories. In reality, longer term we remain less concerned about the latter issue and see interest rates remaining structurally lower for a prolonged period. but volatility in sentiment continues to provide opportunities for stocks to trade dramatically around fair value against this broadly positive market backdrop and we have been flagging the possibility of a somewhat higher turnover in the fund since the beginning of the year.
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Sarasin Sterling Global Thematic comment - Dec 09
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Tuesday, 23 March 2010
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Fund Manager Comment
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Review
Equity Markets advanced again in December. We performed in-line with the benchmark over this period. There has been a mild headwind from the strengthening USD which affected some of the reflation orientated trades and the market became more focussed on higher quality growth stocks over the period. Some of the Industrials stocks in our Intellectual Property & Excellence theme showed their first significant outperformance for some time, closely followed by Pricing Power, this has been our most overweight theme at 29%. The Strong get Stronger and Corporate Restructuring were positive. but mild underperformers over the period largely due to their financials exposure.
Banks in particular were again disappointing, with Citigroup, Mitsubishi UFJ and Lloyds TSB the 3 worst performing stocks in the portfolio over the month. On a more positive note we have had particular success with Delta Airlines, which was up nearly 40% over the month following earnings upgrades. We believe that low levels of capacity and correspondingly high load factors as demand picks up are finally lending the sector Pricing Power not seen for many years. Both ArcelorMittal and US Steel have been strong performers in this theme. Input price increases and talk of price rises in China leading to lower exports have contributed to the more positive backdrop. Nissan, in our Corporate Restructuring theme, has been another strong performer. Cost cutting continues to beat expectation, inventory management has been strong and sales expansion in both China and the US has been extraordinary.
Outlook
Obviously, quite a bit depends on how fast GDP can grow over 2010, and the degree to which financials earnings in particular can recover over the period. In the short term inflationary expectations remain contained and there is a good chance that moderating job losses in the US can lift confidence in the recovery. With current consensus earnings for the S&P of 77.26 for FY 2010 and allowing for a 17x multiple, gains of up to 10% can be justified if economic momentum is sustained.
There will undoubtedly be rate tightening scares over the year, and gains may well be more stock specific than in 2009. We still think rates are likely to go up more slowly than consensus believes - US total debt to GDP is still at an eye watering 370%, and with interest rates close to zero it would be unfortunate to move too early.
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Sarasin Sterling Global Thematic comment - Sep 09
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Thursday, 17 December 2009
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Fund Manager Comment
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The broad changes we made to the portfolio during August, namely reducing our tilt towards the growth and quality factors particularly expressed in our Intellectual Property and Excellence theme in favour of the value, leverage and lower quality factors of our Corporate Restructuring theme by switching capital from one to the other, have stabilised the deterioration in performance. Geographically Japan has continued to disappoint, whilst some of our Emerging Market holdings, particularly the Brazilians, have been very strong. Itau Unibanco, held in our Corporate Restructuring theme, was up 22% over the month.
During September we have added AP Moller to the Strong get Stronger portfolio as we believe the company's superior financial strength versus major competitors and increasing discipline more than insulate investors against the supply/demand imbalance in container shipping. We have also added ArcelorMittal in Pricing Power because we believe Chinese measures to curb capacity in steel should benefit this industry consolidator. Furthermore, we have bought Monster Worldwide, a Restructuring company with significant leverage to an expected recovery in the labour market towards the end of the year. To fund these purchases we have taken profits in Yahoo and BG, a solid company which has limited catalysts to further relative outperformance. We have also sold Merck Kgaa and Bank of Yokohama from our Intellectual Property and Excellence theme.
There remains a concern that markets need to give back some of the gains made over the summer months and October is the traditional time to do this. Our view is that market participants are still underweight risk and cyclicality, with high levels of cash remaining in Money Market funds. Cash looking for higher returns has moved significantly into corporate bonds and performance has been strong. Much of this and more will shift into equity markets as evidence of economic recovery is confirmed. As yet aside from China, we have seen little effect from vast stimulus packages and much of this will not be visible until the end of this year. To date, about $107bn of US stimulus has been spent, or 19% of the total spending package. Although the ultimate trajectory of the recovery is unclear, we would give financial markets the benefit of the doubt over Q4.
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Sarasin Sterling Global Thematic comment - Jun 09
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Monday, 28 September 2009
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Fund Manager Comment
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Markets declined modestly in June and we have performed in line. Cyclicals have lost momentum while defensives have continued to drift upwards and we remain suspicious as to the durability of the rebound. The supply of new equity and the lack of convincing recovery in economic data have been a restraint, indeed for sterling investors the benchmark remains significantly negative for the year.
Growth stocks are again in favour at the moment. Intellectual Property & Excellence has been a key performer with Icap particularly strong, but driven more by the defensive characteristics of companies like Unicharm and Inverness Medical Innovation. Pricing Power has also held up well as the market remains concerned about inflation. This is currently our most overweight theme.
After strong performances we have been reducing energy, industrials and emerging market positions, specifically Russia. We have added to attractively valued defensive positions, such as Nestle in IP&E and Lorillard in Pricing Power. These companies had lagged the market in recent months.
We are broadly positive on the equity markets. Volatility is trending down and the worst is undoubtedly behind us. However, the trajectory of the recovery remains unclear and the Authorities do not have much room for lowering the cost of capital through the interest rate mechanism. The risk premium has already contracted substantially and this is unlikely to drive markets in the absence of evidence of growth. The market has become impatient with the pace of recovery and seasonality does not bode well, so care is required.
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Sarasin Sterling Global Thematic comment - Mar 09
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Thursday, 11 June 2009
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Fund Manager Comment
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We have underperformed the brisk market rally in March, putting us marginally ahead of the benchmark year to date. Macroeconomic data has stopped deteriorating at the rate we saw earlier in the year, and is now plain bad rather than catastrophic. Corporate Restructuring, Strong get Stronger and Intellectual Property & Excellence have been the better performing themes. We have had particular success with Deutsche Boerse, General Cable and Roche. Security of Supply was the weakest theme, rather through absence of robust performers than weakness of any particular stocks. Unfortunately, we locked in a number of losses close to the bottom of the market, including Fedex which we do consider high quality long term Pricing Power story, but we had become nervous at the extent of the deterioration in short term pricing environment. Although we sold before their weak numbers at the beginning of March, the stock has rallied aggressively since. This pattern of oversold stocks rallying hard is replicated broadly, the recovery has been driven by higher beta areas of the market, particularly in the Financials and Consumer Discretionary space where we remain underexposed in risk terms. We have gently been adding to more cyclical and risk based exposure where we see opportunities, rather than on a wholesale basis. In spite of the current optimism that has returned, it could be some time until we are more secure about the durability of the current rally. Valuations are reasonable, liquidity is high, and although the economy is still slowing we now see light at the end of the tunnel.
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Sarasin Sterling Global Thematic comment - Dec 08
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Wednesday, 4 March 2009
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Fund Manager Comment
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Equity markets have rallied steadily over December albeit on reasonably light volume. The better performers over the period have tended to be energy and industrial companies in our Pricing Power theme (Petrobras, Kubota, Waste Management). We were also particularly pleased with our new Strong Get Stronger theme which was up nearly 12% over the period. This was driven by a broad range of companies from financials (MUFG) to retailers (Tesco) and materials / energy (Occidental, Barrick Gold). Over the period we took profits in Santos and Edwards Lifesciences, and we sold our remaining position in Rio Tinto. We started a new position in Fedex which should gain early cycle Pricing Power as the supply chain management industry consolidates.
We remain focused on the possibility that there is further deleveraging due, but on balance this should be offset by genuine buyers of equities as we approach a stabilisation of the macroeconomic environment. The good news on this front remains very limited at the moment, but policy (now on a global, coordinated basis) has become consequently more accommodative. Of particular note has been the massive expansion of the Fed's balance sheet to over $2 trillion. We will, however, be watching the coming Q4 earnings season with some trepidation and several blue chip companies such as General Electric in US have alluded to the difficulty of giving forward guidance on earnings when the economic horizons remain so unsettled. Currently though, volatility is falling, valuations are reasonable, and investors may well favour equities over government bonds which technically look very overboard.
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Sarasin Sterling Global Thematic comment - Sep 08
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Thursday, 27 November 2008
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Fund Manager Comment
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· Against a dismal market and deteriorating economic environment, we have had a particularly tough quarter in relative and absolute terms, losing nearly half of our YTD relative performance. We have been hurt by our Pricing Power and Security of Supply themes, where hedge fund deleveraging, risk aversion and economic concerns have driven down stock prices in our more cyclical companies. We are pleased, however, that in relative terms at least our Corporate Restructuring theme has provided better returns and a degree of diversification. In particular, and perhaps surprisingly given the environment, financials and consumer stocks were amongst the best performers here.
· We are fairly neutrally positioned today, with most risk being at the stock level rather than against currencies, geographies or sectors. This reflects poor visibility and focuses on our core stock picking strengths. Efforts to support asset prices by central banks may not suit the purist, but should prove successful in placating the financial system and restoring confidence. Markets have become oversold, and attractive in valuation terms even on extreme bearish earnings measures.
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Sarasin Sterling Global Thematic comment - Jun 08
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Friday, 29 August 2008
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Fund Manager Comment
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June proved to be a very poor month for equities. However, the fund continues to outperform on a relative basis, which provides some compensation. Markets are beginning to think that continued rising prices will now lead to rate hikes, whilst many key economic growth indicators are deteriorating. Confidence in the market is weak.
Our Security of Supply theme performed particularly well in an environment still conducive to the performance of mining stocks, although we continue to restrict our exposure to this area. Elsewhere we have been particularly encouraged by our healthcare exposure (now our largest overweight sectorally) which is largely held in our Pricing Power and Intellectual Property & Excellence themes. We have been rebuilding our weighting in Corporate Restructuring, although it has been somewhat disappointing over the month. This was in part led by a high Japanese exposure which gave up some of its relative outperformance. We are still hopeful that Japanese domestic investors will begin to switch money into equities as inflation picks up. The region is the strongest major market this year.
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Sarasin Sterling Global Thematic comment - Mar 08
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Thursday, 22 May 2008
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Fund Manager Comment
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Markets have had another difficult month, characterised by a continuation of the sell off followed by a recovery from mid-month. Equities, currencies and commodities, as well as sector and company leadership, have been difficult to read. We underperformed in March, though we remain ahead of the index for the quarter. Recently, we have taken advantage of the high volatility to rebalance the portfolio, reducing our overweight in Pricing Power and our exposure to Energy, Materials & Industrials. We have also narrowed the extreme underweight position in Financials and Healthcare and lowered the extent of our "growth" bias.
Despite well published difficulties, we continue to expect the Fed to handle the current issues without overcorrecting. It is worth pointing out that over the last month the most problematic sectors such as financials have performed the best. Indeed, US Homebuilders are the second best performing sub-sector this year. We believe that the current turmoil is throwing up some strong value propositions and on balance the market should start to recover as we move closer to the US election.
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Sarasin Sterling Global Thematic comment - Dec 07
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Thursday, 21 February 2008
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Fund Manager Comment
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December has been a solid month for EquiSar in both relative and absolute terms. The strength was broad based with all of our themes apart from Corporate Restructuring having out performed. Restructuring continues to be affected by the turmoil in credit markets and the Japanese financials have again been notably weak. Global Convergence was the strongest of our themes, with Kinross Gold and Occidental particularly robust.
The New Year often brings heightened levels of volatility and this month is unlikely to prove exceptional. However, we remain well positioned to benefit from the more inevitable trends in the market place and are comfortable with the structure of the portfolio. It is probably too early to get excited about restructuring opportunities in the financial sectors but there may well be some later in the year. The competition for strategic assets continues to attract attention and we are looking to add further names to our Security of Supply theme. Stylistically we continue to focus on large cap growth stocks.
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Sarasin Sterling Global Thematic comment - Jun 07
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Wednesday, 26 September 2007
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Fund Manager Comment
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Markets have been subject to some profit taking in June, in part due to fears of a respite in the ongoing deequitisation process. We are nevertheless pleased to have out-performed.
Over the month Intellectual Property & Innovation has been the best performing theme, in particular driven by Novozymes and Monsanto. Our Pricing Power theme also did well over the period, with Petrobras particularly strong. Recently we have been buyers of CBS Corp, whose Pricing Power we believe will benefit from the US election and we have added to our Japanese financials in Corporate Restructuring. We funded these by taking profits in Santos and ABN Amro.
Outlook
The outlook for equities seems uncomplicated. Economics, earnings and valuations are fine. Newsflow, particularly M & A related, and liquidity may wane somewhat over the summer months, but the market should drift positively. We have plenty of new ideas and a process well pitched to take advantage of them.
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Sarasin Sterling Global Thematic comment - Dec 06
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Wednesday, 14 March 2007
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Fund Manager Comment
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We were pleased that our confidence in global equity markets was borne out in December, and some respite in last month’s extreme dollar weakness has provided reasonable absolute returns for investors.
The more cyclical and higher risk areas of the market provided the greatest returns, with stunning performances from Emerging Markets. It follows that our best performing themes were Global Convergence, Corporate Restructuring and Pricing Power respectively, with the more Growth orientated Intellectual Property & Innovation lagging marginally.
We are confident that equity markets will make further progress going into 2007. Growth and earnings are well underwritten and may again surprise on the upside and we may begin to see some multiple expansion in 2007. M & A activity continues apace. Despite our foray back into Emerging Markets over the last quarter, stylistically the portfolio should continue to make a steady transition towards more secular growth names away from the cyclicals.
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Sarasin Sterling Global Thematic comment - Sep 06
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Friday, 17 November 2006
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Fund Manager Comment
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Equity markets traded positively over the period, particularly into the end of the month. There has been a significant amount of sector and style rotation. One constant however has been the sell off in high beta oil and commodity stocks as global economic data has been somewhat restrained. In relative terms this has hit the more cyclical characteristics of our Pricing Power and Global Convergence themes. However, the market itself has been broadly supported by falling oil prices and falling bond yields, which has fostered an environment where investors have been reasonably comfortable embracing risk. Our Corporate Restructuring theme has performed well as a result.
We are confident that equity markets will make progress over Q4. Growth and earnings are well underwritten and may again surprise in light of lower oil prices, whilst inflation risks seem to be subsiding. Stylistically the portfolio will continue to make a steady transition towards more secular growth companies, reducing those with more cyclical earnings.
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Sarasin Sterling Global Thematic comment - Jun 06
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Monday, 28 August 2006
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Fund Manager Comment
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Global equity markets rebounded strongly from their mid- June lows, with the MSCI World index rising by more than 5.5% in sterling terms in the last 2 weeks, finishing the month just over 1% higher (Bloomberg). The high quality characteristics of our Efficiency and Automation theme performed particularly well as investors sought higher quality stocks during and after the equity market correction.
The more cyclical characteristics of Global Pricing Power, on the other hand, were sold aggressively at the beginning of the period but they rallied strongly towards the end of the month. It was, however, our poorest theme over the period. We are confident that the recent stability in equity markets will be sustained and see particular value in the high quality defensive growth stocks we are holding. The valuation of global equities is at a 15 year low in absolute terms and as equities continue to look compelling against other asset classes we retain our enthusiasm for the Fund.
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Sarasin Sterling Global Thematic comment - Mar 06
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Tuesday, 16 May 2006
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Fund Manager Comment
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Equity markets continued their strong performance in March, ending the quarter at their highest levels since 2000. We are pleased to have outperformed over the month and the quarter. In fact, EquiSar is now ahead of the benchmark over one, three and five years and, of course, since launch. We have been particularly pleased with our new theme, Global Convergence, which significantly outperformed the benchmark over the period. The beneficiaries of strong economic growth, asset reflation and growing M&A activity also contributed positively to our Corporate Restructuring and Pricing Power themes. We remain comfortable with the outlook for equity markets, but regard a modest de-risking of the portfolio prudent after recent strength. We will therefore be looking to reduce exposure to some of the most volatile areas and, where appropriate, to those stocks that have performed particularly well.
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Sarasin Sterling Global Thematic comment - Dec 05
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Tuesday, 14 March 2006
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Fund Manager Comment
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We have had an excellent December to crown a year of strong returns. The inflation backdrop has remained benevolent in the face of strong economic data and solid earnings momentum. Particularly, the Japanese market has gone from strength to strength on improving data, the Topix returning more than 8% in sterling terms over the month. We have had plenty of exposure to the region in our Corporate Restructuring theme and have used this rally as an opportunity to take profits from some overbought positions.
We remain confident about equity markets. The Federal Reserve has begun to intimate it may be near to ending the 18- month tightening policy. With corporate spreads at low levels there is a realistic prospect of a market re-rating in 2006 - something we have not seen for 5 years despite recent strength in the market.
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Sarasin Sterling Global Thematic comment - Nov 05
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Tuesday, 13 December 2005
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Fund Manager Comment
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Global Equities are proving resiliant and have continued to rally off October lows. Economic data has surprised on the upside whilst inflation seems to be contained and oil prices have been falling.
Thematically, Corporate Restructuring and Pricing Power have been excellent performers over the period, reflecting increasing investor appetite for both risk, particularly event driven, and cyclical exposure supported by a still benign monetary back-drop. Intellectual Property and Innovation was our best performing theme despite relative weakness in the Pharmaceutical sector. Japan and the US have been key outperformers. We have been overweight Japan and had been making efforts to reduce our underweight in the US.
We remain positive on Equity markets and we are commited to a continuation of this year end rally, but we remain vigilent to signs of slowing momentum and may look to take profits from some over extended positions.
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Sarasin Sterling Global Thematic comment - Sep 05
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Friday, 18 November 2005
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Fund Manager Comment
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Record high commodity prices, particularly in the wake of hurricane Katrina, were the main feature of September's strong equity rally. Despite our neutral weighting in this area, we returned an excellent absolute and relative performance for the month.
As inflationary pressures continued to build new areas with pricing power began to emerge. This provided support for our Pricing Power theme making it once again our best performing theme last month. Stable to slightly lower bond markets, on the other hand, negatively impacted the performance of the Cash flow Opportunities theme, given its positive correlation to the bond market.
We remain fundamentally positive for the equity market as we enter what is traditionally their strongest period of the year. However, a short-term setback is possible given their recent strength and one could reasonably expect to see leadership revert to some of the areas that have not performed so well recently.
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Sarasin Sterling Global Thematic comment - Jul 05
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Wednesday, 14 September 2005
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Fund Manager Comment
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We are pleased to report an excellent month for our Thematic funds in both relative and absolute terms, as global economic growth strengthened and corporate earnings, cash flow and dividends exceeded expectations.
The growth characteristics of our Intellectual Property and Innovation theme stood out in an environment of increasingly positive economic data, while on-going corporate activity, particularly in Germany (where we have been heavily exposed) supported our Corporate Restructuring theme. The ultra-high quality nature of our Efficiency and Automation theme resulted in more modest, albeit positive, returns during the month.
While the possibility that we experience a period of consolidation in August cannot be excluded, we remain positive on equity markets on the back of attractive valuations, in absolute terms and relative to other financial asset, and robust earnings growth.
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Sarasin Sterling Global Thematic comment - Aug 05
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Wednesday, 14 September 2005
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Fund Manager Comment
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August saw a period of consolidation following strength in July. Oil prices rose again and there were concerns that it would negatively impact profit margins and/or inflation. In the event, Q2 earnings were excellent while bond investors saw the rise in the oil price as deflationary rather than inflationary. Equities rallied nicely towards the end of the month.
Japan was the strongest region last month, which is a little surprising given its sensitivity to the oil price. Investors preferred to focus on the improving outlook for the domestic economy. Corporate Restructuring and Pricing Power were again the strongest themes, with gains in the former coming mainly from our exposure to the restructuring process underway in Germany as we approach the election. Pricing Power continued to benefit from further strength in energy and commodity-related investments.
Despite excellent returns this year, we continue to believe that the growth expectations embedded in equity valuations are modest. Sentiment indicators are broadly negative (which has historically proven to be a good buy signal) and investors, particularly in Europe remain lowly weighted in equities. We therefore look forward with optimism, especially as we approach the traditionally strong last few months of the year.
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Sarasin Sterling Global Thematic comment - Jun 05
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Monday, 15 August 2005
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Fund Manager Comment
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The strong performance in Equity markets has continued into June. The rally has been broad based, despite continued high oil prices and a further strengthening of the dollar, particularly against sterling (because of weakness in UK economic data and news that several members of the MPC had voted for rates cuts). Our Cash Flow Opportunities theme has thrived in this environment of falling bond yields. Our holdings in highly cash generative oil companies such as Occidental Petroleum, ENI and BP (with cash flow yields of 7.9%, 9.6% and 7.6% respectively) have been particularly successful. Elsewhere, the ongoing undershooting of inflationary numbers has fueled our Global Pricing Power theme.
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Sarasin Sterling Global Thematic comment - May 05
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Tuesday, 14 June 2005
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Fund Manager Comment
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May began badly for equity markets as economic momentum continued to slow. Political uncertainty in the shape of adverse China/Japan relations, the forthcoming vote on the EU Constitution and US efforts to persuade the Chinese to revalue their currency caused additional uncertainty. However, we were encouraged by the excellent Q1 earnings and by exaggerated claims about the demise of the hedge fund industry in the wake of the General Motors debt rating downgrade. In our view there was a clear disconnect between fundamentals and sentiment, which presented an opportunity to perform in relative as well as absolute terms.
As expected, equities rallied towards the end of the month. Our largest theme, Intellectual Property and Innovation performed particularly well, as its focus on the healthcare and technology sectors was rewarded. Not surprisingly, the more defensive Cash Flow Opportunities theme marginally underperforming the market but we had already reduced exposure so that it represented our smallest theme. Overall, equities remain our preferred asset class thanks to historically low valuations (15 year low on the price to earnings ratio) and excellent fundamentals.
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Sarasin Sterling Global Thematic comment - Apr 05
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Tuesday, 14 June 2005
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Fund Manager Comment
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April was a difficult month for markets. Cyclical stocks began to sell-off as economic statistics turned increasingly negative and risk aversion increased. This resulted in a shift into the more traditional defensive sectors such as tobacco and pharmaceuticals, so whilst Corporate Restructuring lagged, the higher quality blue chips in our Efficiency & Automation theme outperformed. We have been encouraged by the performance of the Healthcare sector over the period and this remains our key sector overweight with exposure through most of our themes. Looking forward, we remain favourably disposed towards equities, but we recognize the potential for higher quality names to outperform and many stand on a discount to the broader market. We are keen to add to our Cash Flow Opportunities theme, possibly raising money from Intellectual Property & Innovation.
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Sarasin Sterling Global Thematic comment - Mar 05
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Wednesday, 13 April 2005
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Fund Manager Comment
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March has seen equity markets retrace most of the year's gains, but our portfolio remains ahead of its benchmark year to date. Alan Greenspan signalled that inflation was becoming an increasing concern and that the interest rate rises would at least continue, and may in fact accelerate. The carry trade has been unwinding as a result, with falls in a number of riskier assets such as high yield debt and emerging market equity and debt. There has also been weakness in the Mining and Energy sectors, though we were encouraged by the performance of our Pricing Power theme, historically exposed to these sectors, which bucked the trend by providing strong absolute performance over the period. We have moderated our medium term view to a mild positive on equity markets until the less positive prevailing trends diminish.
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Sarasin Sterling Global Thematic comment - Nov 04
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Monday, 24 January 2005
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Fund Manager Comment
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A definitive incumbent victory in the US election, falling oil prices and broadly stable bond yields have driven a rally in equities. It has however been a time of turmoil in the currency markets. The 5.5% appreciation of Sterling against the USD over November has meant that, unfortunately, the benchmark MSCI World (GBP) index is only up some 1%. Equisar has outperformed this index by some 90bps over the period. Our Global Pricing Power theme, which has the highest weighting in the portfolio, was the best performer, driven by a range of stocks such as World Co Ltd, the Japanese clothing retailer, and British Sky Broadcasting in the UK. Exposure to Japanese exporters in our Intellectual Property & Innovation theme left it the weakest theme over the period.
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Sarasin Sterling Global Thematic comment - Dec 04
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Monday, 24 January 2005
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Fund Manager Comment
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After a stagnant summer for equity markets, EquiSar experienced marginal out performance over the fourth quarter during a rally catalysed by the US election and falling oil prices. The higher risk and more cyclical natures of Corporate Restructuring and Pricing Power respectively, lead these returns. We do foresee a more difficult period for earnings in coming months and view the continuing trend of increased payout ratios as a support for the market embodied by our Cash Flow Opportunities theme. We are also keen to highlight the growth characteristics of our Intellectual Property & Innovation theme, as we believe those companies with a proven ability to bring new products to bear will be clear winners in the current environment.
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Sarasin Sterling Global Thematic comment - Sep 04
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Tuesday, 9 November 2004
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Fund Manager Comment
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Despite the oil price, which has remained stubbornly high, and as I write is touching the USD50bn threshold, the negative sentiment we saw in August became too extreme and resulted in a relief rally, with high dividend and IT hardware stocks leading the gains. Fittingly our Cash Flow Opportunities theme was the best performer over the period, driven by our sizeable holdings of ENI Spa and Occidental Petroleum, which have cash flow yields of 8.2% and 11.4% respectively. Global Pricing Power performed extremely well and commodity based stocks such as Cameco, AP Moller-Maersk and Rio Tinto were the key contributors. We remain positive on global equity markets, which are underwritten by the extraordinary fall in long bond yields. Corporate cash flow margins are at record levels across all global markets and high quality companies are at a valuation discount to the market as a whole.
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Sarasin Sterling Global Thematic comment - Jul 04
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Thursday, 23 September 2004
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Fund Manager Comment
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Equity markets declined modestly in July as investors digested quarterly results and although future guidance has been mixed, the announced results were generally good. This is against a backdrop of oil prices reversing the fall in June and rallying to new highs in July. The fund essentially matched the performance of the benchmark over the period. The quiet summer period is favouring Sarasin's Cash Flow Opportunities theme, which has an emphasis on total absolute return. Within Sarasin's Pricing Power theme, some of the more cyclical holdings have performed very well due to a combination of valuation, ongoing pricing power and the realisation that global growth, especially China, is still quite reasonable. The fund manager's continue to wind down the funds exposure to Survival of the Fittest and built up Sarasin's new theme, Intellectual Property & Innovation.
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Sarasin Sterling Global Thematic comment - Aug 04
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Thursday, 23 September 2004
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Fund Manager Comment
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Despite rising volatility the fund has performed in line with the funds Benchmark, The MSCI World Index (Sterling), over August. Surging oil prices early in the month saw increasing levels of risk aversion, as investors began to worry about the impact of higher energy costs on profit and growth prospects. The defensive characteristics of Sarasin's Cash Flow Opportunities theme provided positive returns as a result. However, the market rallied towards the end of the month, as investors began to look beyond the short-term impact of these higher oil costs. The Materials exposure in Sarasin's Pricing Power theme performed exceptionally well during this rally. The fund manager's remain positive on Equity markets which they see as being underwritten by low valuations and strong cashflow in what the fund manager's perceive as being an over pessimistic summer period.
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Sarasin Sterling Global Thematic comment - Jun 04
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Tuesday, 14 September 2004
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Fund Manager Comment
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Equity markets rallied in June as the oil price fell and investors began to accept the coming rise in US interest rates. The fund has outperformed the benchmark over the period. Earnings visibility and risk aversion continued to be key drivers and Sarasin's Efficiency & Automaton theme was strong as a result. After a tough April & May the more cyclical names in Sarasin's Pricing Power theme have also done better, and Sarasin was particularly pleased that one of the key Pricing Power holdings, Noranda, has been subject to a takeover bid. The fund manager's have gradually been winding down the funds exposure to Survival of the Fittest and Sarasin is introducing a new theme, Intellectual Property & Innovation over coming weeks.
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Sarasin Sterling Global Thematic comment - May 04
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Monday, 14 June 2004
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Fund Manager Comment
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May has been a difficult month. The positive economic data at the beginning of the period raised concerns about interest rates. Cyclical sectors and markets, such as the Emerging world, sold off aggressively as a result. It follows that our Corporate Restructuring Theme and Profiting from Deflation Theme were the worst performers. The former was hit by rising risk aversion and the higher cost of borrowing in an environment of rising bond yields. The latter was subject to selling as the relative attractions of the hard asset reflation plays like the property companies and gold producers were eroded. The environment has now stabilised and we consider ourselves well positioned to outperform.
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Sarasin Sterling Global Thematic comment - Mar 04
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Friday, 21 May 2004
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Fund Manager Comment
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Two threats to the global growth outlook have dominated global markets in the last few weeks. The first is speculation that the Fed will begin to raise interest rates in the next few months. The second is the risk of a sharp slowdown in China's growth. It is our opinion that both the trajectory and ultimate peak of US rates, and the possibilities of a hard landing for the Chinese economy are overblown. However market sentiment is more difficult to forecast and despite limited falls in major indices we have experienced a sharp drop off in relative performance over the period. Rising risk aversion and heavy sector rotation have mainly affected the Asian overweight Corporate Restructuring theme and cyclical Pricing Power elements such as Materials. Unsurprisingly the high quality business models in Efficiency and Automation, and the high dividend, high free cash flow characteristics of our Profiting from deflation have been clear outperformers.
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Sarasin Sterling Global Thematic comment - Dec 03
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Friday, 5 March 2004
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Fund Manager Comment
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The fund had another good month in December, outperforming its Benchmark MSCI World index by 1.1%. The 3.2% return was driven particularly by the Pricing Power theme, which returned a solid 6.7% over the period. The weakening dollar, which fell 3.7% on a trade weighted basis over the period, has stimulated huge interest in dollar priced commodities. Primary producers such as the metals & mining companies have suffered from underinvestment for some years and are now experiencing resurgence in pricing power. Stocks like CVRD, Noranda, Cameco and BHP Billiton were exceptional performers as a result.
A degree of uncertainty crept in to year-end trading lifting energy, healthcare and utility stocks. These cash generative sectors, which had underperformed over the year, now provide attractive value and contributed to a strong performance from the Profiting from Deflation theme which was up 4.6% over the period.
Sarasin are positive for 2004, although they doubt this year's strong upturn can be repeated. Sarasin do expect monetary policy to remain loose even as growth picks up. It will however be a year to exercise a degree of caution and not get swept away by consensus thinking, conditions which will argue strongly for the thematic approach.
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Sarasin Sterling Global Thematic comment - Sep 03
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Friday, 14 November 2003
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Fund Manager Comment
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Equities declined over September, stalling the 6 month rally. The period was characterised by US dollar weakness and concern about the durability of the economic recovery in light of weaker than expected economic data, particularly concerning the US labour market.
Sarasin's new Profiting from Deflation theme, which was flat over the period, displayed its defensive characteristics. Survival of the Fittest was also strong in relative terms as investors sought larger cap, more defensive names. Asian Emerging Markets retraced some of the gains made over the previous month and Sarasin's Corporate Restructuring theme, which is very exposed to this area, underperformed despite strong gains from Sarasin's US airline holdings.
Technology and other cyclical stocks were also disappointing and Pricing Power was Sarasin's weakest performing theme over the period as a result. The fund manager remains confident that equities can make ground over the rest of the year, supported by strong liquidity, and that the fund can continue to provide outperformance.
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Sarasin Sterling Global Thematic comment - Jul 03
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Monday, 25 August 2003
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Fund Manager Comment
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Equities enjoyed a fifth consecutive month of gains in July. Macroeconomic news flow has been mixed, but a strong second quarter results season has supported markets. The major feature of this period has been a protracted sell off in bond markets. This suggests a higher borrowing cost for corporates and increased credit concerns. Sarasin have been reducing the Corporate Restructuring theme as a result. Sarasin have also continued to reduce the funds exposure to highly valued technology stocks held in the Efficiency & Automation theme. The proceeds have mostly been applied to cash generative companies in the new theme "Profiting from Deflation".
Sarasin remain interested in companies operating in the environment of the super competitive exchange rates and cheap money available in Far Eastern Emerging Markets and this should continue to be a significant part of the portfolio. Sarasin are also focusing on Japan where gradually rising business and consumer confidence indicates that risk aversion is declining, which should encourage further flows from low-yielding assets into stocks.
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Sarasin Sterling Global Thematic comment - Jun 03
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Wednesday, 13 August 2003
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Fund Manager Comment
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June was another successful month. EquiSar was positive over the period and outperformed the benchmark index. Corporate Restructuring stood out as Sarasin's best performing theme, returning more than 6% over the period. This was driven by an exceptional performance in the US Airlines (Continental, Northwest) and some Japanese cyclicals (Nippon Yusen, Nomura). Japanese Financials (Mitsubishi Tokyo Financial and Sumitomo Trust & Banking) were also responsible for an impressive performance from the Survival of the Fittest Theme. It was particularly encouraging to see the breadth of theme performances. Even Sarasin's worst performing theme over the period, Efficiency and Automation, was up, though it was tempered by a position in IT company Medion which consolidated after a strong positive move in the previous month.
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Sarasin Sterling Global Thematic comes of age!
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Monday, 11 August 2003
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Fund Manager Comment
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As the longest running global thematic fund in the UK, Sarasin CI EquiSar Sterling is now entering its eight year. Whilst equity markets have experienced extraordinary changes in fortune over this period, Harry Talbot Rice, Sarasin's Equity Fund Manager describes how thematic investment has led to EquiSar's out-performance of the benchmark, (the MSCI World Equity index) in 6 out of 8 years (or part years).
Thematic investing developed from the belief that low tracking error is not the same as low risk. To the contrary, Sarasin believes that index buying is value destroying because investors apply the most money to the largest stocks in an index. This philosophy is particularly important in the low growth environment under which investors currently operate and investments should be carefully picked on their individual merits. Sarasin Investment Management identifies these merits by way of picking long-term earnings drivers, or themes.
Over the life of the fund Sarasin have had eight themes, five of which they are running today. Sarasin's Corporate Restructuring theme has been running since the fund launched and has proven successful in providing significant absolute returns under many different market conditions. Sarsin recently launched their latest theme, Profiting from Deflation, which seeks to benefit from deflation rather than inflation being the primary concern of central banks. This theme favours companies that generate sustainable free cash flows and dividend yields that are superior to corporate and government bond yields, further characteristics Sarasin believes will be key considerations for future investment selection.
The Fund is currently 1st quartile and is 17% ahead of its benchmark index, the MSCI World Equity index (£GBP terms) since launch. The lack of correlation between our themes has also ensured that the volatility of these returns has been significantly lower than the benchmark with the fund volatility at 5.32 whilst the Index is at 5.72.
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Sarasin Sterling Global Thematic comment - May 03
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Wednesday, 25 June 2003
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Fund Manager Comment
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The euro's 5.5% appreciation against the dollar compounded concerns about the economic outlook for Europe, where the fund's portfolio remains overweight, though hopes for an ECB rate cut contributed to a rally in the region towards the end of the month. Despite significant volatility, European indices were largely unchanged over the period, whereas the FTSE100 and S&P500 were up 4.1% and 5.1% respectively. The funds overweight position in Corporate Restructuring was rewarded as the market focused on higher-risk, story-driven situations, such as US airlines, and Far Eastern regional restructurings as the perceived risk of SARS diminishes. Global Pricing Power also put in a particularly good month, led by Altria which rallied 26% on the back of positive news flow concerning reduced litigation risk.
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Sarasin Sterling Global Thematic comment - Mar 03
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Thursday, 22 May 2003
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Fund Manager Comment
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The coalition's attempt to achieve wide ranging support for the Iraq conflict surpressed markets for the first half of the month, but the long anticipated 'war rally' did materialise. Markets and EquiSar provided positive returns over the period. Sarasin's Survival of the Fittest theme, with its natural overweight in US equities was particularly strong as high quality names attracted investors. The fund manager's are also convinced that the Restructuring theme, with its focus on bottom line earnings will perform well in the current environment. The fund manager's continue to believe that the economic environment remains challenging but the fund manager's are encouraged by falling oil prices, and view this as a key indicator to equity market performance over the coming months.
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Sarasin Sterling Global Thematic comment - Dec 02
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Thursday, 20 February 2003
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Fund Manager Comment
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In a month where the markets distinctly lacked seasonal spirit, the fund outperformed the MSCI World index by almost 2%. The thin trading conditions and the geopolitical noise surrounding Iraq led to some exaggerated downward share price movements. Having fallen for three consecutive years, the odds of a fourth year of negative equity markets are low. However, Sarasin do not expect a return to bull market conditions and believe that good selection will be key to future performance. Sarasin feels their themes have helped them to identify many of the recent stock market winners like Deutsche Telekom, UBS and Imperial Tobacco. In terms of markets, Asia and Japan continue to be promising, while Europe offers huge restructuring potential. Sarasin's feels that the global approach and use of themes are helping them to identify many of these opportunities before it is too late.
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Sarasin Sterling Global Thematic comment - Nov 02
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Thursday, 19 December 2002
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Fund Manager Comment
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In November, the equity market encouragingly extended gains begun in October with the half percent reduction in US interest rates. The MSCI World Equity index rose 6% in sterling terms, buoyed by United Nations unanimity on a resolution for weapons inspectors to return to Iraq, a marked reduced in asset selling by institutions as well as a spate of better-than-expected corporate results and reassuring US economic data. Technology stocks were among the best performers, benefiting from favourable trading news from Philips. By contrast, bonds gave up some ground, with the UK bond index down 0.5%, although corporate bonds relatively outperformed sovereign bonds. The fund increased exposure to equities at the expense of bonds, in particular to technology and telecom stocks. Positions in defensive stocks were reduced after strong relative performance. At the same time the fund manager's reduced exposure to US assets which they believe will be susceptible to US dollar weakness. Sarasin remain cautiously optimistic that equities can extend further recent gains.
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Sarasin Sterling Global Thematic comment - Oct 02
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Wednesday, 13 November 2002
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Fund Manager Comment
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The US market managed to look through the mixed economic data and consolidate its fourth consecutive week of gains. The US and high beta sectors led the rally, with the Nasdaq outperforming broader European Markets by some 10%, albeit from lower levels and on reasonably light volumes. EquiSar is particularly exposed to Large Cap Technology names through Sarasin's Survival of the Fittest theme, which rose by 9.9% over the period. Sarasin's Energy theme suffered from the erosion of the war premium - Brent traded down from $29 to $25 - and lower production guidance from BP. Japan received a setback as Koizumi's "jam tomorrow" attitude to the reflation plan depressed equities. The restructuring theme rose by just 3.8% over the period. Overall, further strength is anticipated and the fund managers remain cautiously optimistic.
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Sarasin Sterling Global Thematic comment - Sep 02
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Monday, 11 November 2002
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Fund Manager Comment
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It has been a turbulent month for equity markets, the MSCI World index (GBP) is down 12% over the period. The S&P 500 dropped 11% over the month, its worst performance since the LTCM-inspired panic of August 1998. The market believes the strength of the global economic recovery is not sustainable and that, at best, real growth will remain in the anemic groove seen over the past year; at worse, there's a double-dip. This scenario, one of extreme economic pessimism, is an overreaction. Pricing power is scarce in this environment, but where available is a strong defensive characteristic. Global Pricing Power was Sarasin's best performing theme over the month. Global equities appear fairly valued on a number of measures, but sentiment remains subdued and the market is testing some key technical levels. The fund managers remain focused on equities without significant economic exposure.
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