Overstone International All Cap Select Fund
A focussed international all cap select strategy with a classic, contrarian approach to building long term value. (Formerly the Overstone Global ex US Equity Fund)
Investment objective
The Fund will attempt to achieve over the long term a total return in excess of that of the MSCI EAFE Index (with net dividends reinvested) through investment in a concentrated portfolio of equity securities, primarily though not exclusively of large companies, selected from the major markets (except the U.S.) and to a lesser extent from some emerging markets, worldwide. The approach is classic contrarian value, based on bottom-up fundamental research of individual companies.
Fund particulars
| Launch date | 01 June 2006 |
|---|---|
| Fund size | US$23.7m |
| Domicile | Ireland |
| Structure | QIAIF |
| Base currency | USD |
| Dealing | Daily |
| Min. investment | €100,000 |
| Benchmark | MSCI EAFE |
Richard Garstang
Samuel Ziff
Christoph Ohm
Richard Garstang
Richard joined OP in November 2006. He was previously employed by Man Securities as a research analyst covering the banking and specialty finance sector. He has also worked as a consultant for Deloitte in London and San Francisco. He graduated from St. Andrews University. He co-manages the global equity income and international all cap select portfolios and contributes to the overall investment selection.
Latest publications
Latest publications
Samuel Ziff
Sam joined OP in April 2013. He was previously employed by J.P. Morgan Cazenove working in the UK Industrials Corporate Finance team for a total of 4 years. He graduated from Oxford University. He co-manages the global equity income and international all cap select portfolios and contributes to the overall investment selection.
Latest publications
Latest publications
Christoph Ohm
Christoph joined OP in August 2015. He previously worked as an analyst at Marlborough Partners, providing financing advice to private equity firms. Before that, he worked in the valuation team at Duff & Phelps. He graduated from Aston Business School and Free University of Berlin. He is Associate Portfolio Manager for the international all cap select portfolios, and contributes to the overall investment selection.
Latest publications
Latest publications
International All Cap Select Equities Strategy
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Commentary
The fund fell 1.1% in August while the MSCI EAFE Index fell 3.8%. On a year-to-date basis, the fund has risen by 19.2% while the MSCI EAFE Index has risen by 10.9%.
The largest detractors to the fund’s performance in the month were, in order of their impact, Siemens (-10.3%, total return in local currency), Alibaba (-7.5%) and ArcelorMittal (-6.7%).
The weak performance of Siemens, Alibaba and Arcelor was driven by a darkening outlook for the Chinese economy. Siemens, the German industrial group, derives around 13% of its revenues from China. Exposure to China is most significant in its factory automation division, Digital Industries. This division provides industrial software and hardware, and derives 25% of its revenues from China. For the quarter ending June, Siemens reported a 61% decline in factory automation orders from China, taking Chinese orders to below 2019 levels. While the headline sounds dramatic, we do not find it surprising given the exceptionally strong order environment during COVID. Digital Industries is not normally a business that builds up orders years in advance, with the backlog before COVID at around one third of annual revenues. During COVID this rose to over two thirds of revenues – an unprecedented level that reflected customers’ concern around supply chain constraints. We are now seeing a return to normal, with customers destocking as component availability improves. Importantly, Siemens has seen very few order cancellations. This is because it increasingly asks for prepayments, helping to avoid double ordering in times of component shortage.
We do not attempt to forecast orders or revenues on a quarterly basis, but we remain positive about the long-term outlook for Digital Industries. The need for energy efficiency, labour efficiency, and increasing localisation of supply chains means that corporates will continue to invest in automating their factories. Siemens is well positioned to address those needs and they have continually gained market share.
Beyond Digital Industries, Siemens also owns leading businesses in building and grid automation, hospital equipment, and rail infrastructure. The long-term outlook for all of these remains good, and the company should be able to achieve its goals of growing group revenues by 5-7% through the economic cycle and growing earnings per share at high single digit rates.
Over recent years Siemens has divested its gas, power and wind assets, and it has floated the healthcare business. In the process Siemens has become more profitable and cash generative. However, the valuation remains undemanding at a price-to-earnings ratio (P/E) of just 14 times. Excluding the listed healthcare business (Siemens continues to own 75%), the core business is valued at around 11 times P/E.
The largest positive contributors to performance in the month were, in order of impact, IWG (+17.2%), First Pacific (+18.4%) and JD Wetherspoon (+7.0%).
Commentary
IWG, the serviced office provider, reported a satisfactory set of results during the month. The key drivers of the business are all showing positive momentum: improvement in occupancy, higher pricing, and good growth in service revenue. The overall estate is also growing, with an additional 400 new locations signed in the first half – the benefit of which has yet to be seen and will start to materialise over the next year. Costs were well controlled, helped by a high proportion of capital-light openings. This all resulted in good cashflow and a further reduction in net debt.
The other significant piece of news that impacted IWG came from WeWork which announced that there was “substantial doubt” about its ability to keep operating. The warning cited financial losses, cash needs and a drop in membership. WeWork announced a 1-for-40 reverse stock split later in the month in a bid to save its listing on the New York Stock Exchange. Ultimately, WeWork’s problems may be IWG’s gains, with a less competitive serviced office market and the potential for IWG to gain market share.
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Commentary
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Commentary