In June, the Evenlode Global Equity fund posted total returns marginally behind its comparator benchmark, the MSCI World Index. As has been flagged in many other publications, this remains an incredibly narrow market with performance dominated by a few anointed winners. The ‘Magnificent Seven’^[1]have accounted for 48% of growth of the MSCI World Index this year. Similarly, the percentage of members of the S&P 500 Index outperforming the overall index is at 25%, the lowest proportion for the past half century. We believe this narrowness of performance is unlikely to persist over the long run. On inspection, earnings growth across companies is broader than share price movements would suggest, and we remain deeply convinced that ultimately share prices follow earnings growth not vice versa.

The fund’s low relative exposure to the Technology sector (as defined by GICs) was a significant detractor to the fund’s relative performance against its benchmark in the past month. The sector outperformed, posting close to double-digit total returns driven by familiar themes; the rise of Artificial Intelligence (AI) and the ongoing transition to cloud. The seven greatest contributors to fund performance in June were Microsoft, Accenture, Alphabet, Amazon, RELX, Verisk, and Wolters Kluwer. These companies account for approximately a third of the portfolio and either directly offer cloud and AI services or can integrate these technologies into client offerings. However, only the first two of these are included in the Technology sector.

The weakest absolute contributor (by sector) for the portfolio was the Consumer Staples sector, as macro-economic concerns over consumer spending persisted. The management of L’Oréal, the French beauty company, flagged weaker guidance on China, with a delay to the expected consumer rebound, and a slowdown in the US mass make-up market. These headwinds need to be put in context of continued robust beauty market growth and economics. We expect L’Oréal to continue its world-leading investment in marketing and innovation, and consequently to continue to capture market share over the quarters and years to come.

We now enter July, a month that will feature both elections in Europe and the beginning of the second quarter results season, both of which could influence volatility. Our investment philosophy and process remain unchanged, with a focus on companies that can compound returns over the long-term.

^[1] Alphabet (Google), Amazon, Apple, Meta Platforms (Facebook), Microsoft, NVIDIA, and Tesla.