Transcript
JUNE 30, 2017
Global Concentrated Growth Quarterly Review Composite Performance
Periods Ending June 30, 2017
Performance Highlights ● Portfolio performance was helped by
23.5
25
18.8 18.6
20 Return %
stock selection and an overweight position in information technology, particularly in the internet software and services industry, as well as selection in consumer discretionary and financials.
22.8
15
12.1
10
6.8
6.7
6.6
5.7 4.3
5
6.0
11.3 10.5 11.4
6.5
● Stock selection in the industrials and 5.7
4.8
5.0
3.7
4.9
health care sectors detracted from relative returns. ● Geographically, investments in China
0 Qtr 2
1 Year
Global Concentrated Growth Gross of Fees
3 Year
Global Concentrated Growth Net of Fees
5 Year
10 Year MSCI ACWI Growth
MSCI ACWI Benchmark
Source: American Century Investments, MSCI Inc. The value of investments can fluctuate. Data assumes reinvestment of dividends and capital gains. Data reflects past performance. Past performance does not guarantee future results. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Performance less than one year, when shown, is not annualized.
and the U.S. aided performance, while our holdings in Ireland and Switzerland weighed on relative returns.
At A Glance Inception: June 1, 2005 Benchmark: MSCI ACWI
Quarterly Top Relative Contributors and Detractors
AUM: $295.71 million
Contributor
(%)
Detractor
Tencent Holdings Ltd
0.74
Pioneer Natural Resources Co
-0.70
Kering
0.71
HD Supply Holdings Inc
-0.68
Alibaba Group Holding Ltd
0.71
Allergan PLC
-0.31
Autodesk Inc
0.46
Ingenico Group Sa
-0.15
HDFC Bank Ltd
0.36
Zions Bancorporation
-0.15
Attribution Analysis
(%)
One Year Ending June 30, 2017
Cumulative Excess Return %
5.00
4.46 4.11
4.00 3.00 2.00 1.00 0.23
0.12
Security Selection
Currency Effect
0.00 Sector Allocation
Source: FactSet
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Total Effect
Global Concentrated Growth
JUNE 30, 2017
Our Growth Equity Philosophy
Goal
Our time-tested philosophy of growth investing centers on the belief that accelerating growth in earnings and revenues, rather than the absolute level of growth, is more highly correlated to stock price performance.
Seeks to outperform the MSCI ACWI by 3% to 4% annualized over a market cycle with expected tracking error of 5% to 7% versus the benchmark.
This directs us to research different companies than other growth managers, as we do not require an absolute threshold of earnings or revenue growth, allowing us to take Risk Guidelines as the earnings acceleration becomes visible.
-to-earnings multiple
Maximum position size: 5% active weight
Investment Process Investment Universe • Market capitalization > $3B • Sufficient trading liquidity
1 2 3
Idea Generation Identify companies exhibiting accelerating growth and improving fundamentals • Fundamental information flow • Quantitative screens Fundamental Analysis • Confirm acceleration is genuine and sustainable Portfolio Construction • Focus portfolio on best ideas • Monitor risk controls and guidelines
Portfolio
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30
50 Companies
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Global Concentrated Growth
JUNE 30, 2017
Portfolio Characteristics
Investment Team
Characteristics
Portfolio
Benchmark
Weighted Average Market Capitalization
$77.4 B
$97.2 B
Median Market Capitalization
$28.3 B
$6.6 B
Price To Earnings Ratio, Historical 1 Year
32.4x
19.0x
Price To Earnings Ratio, Forecasted 1 Year
23.6x
16.6x
EPS Growth, Historical 1 Year
20.8%
11.6%
EPS Growth, Forecasted 1 Year
23.4%
13.9%
Number of Holdings
32
2501
Number of Countries
7
47
Turnover, Trailing 1 Year
59%
N/A
% Cash
1.9%
0.0%
● Portfolio Managers
- Keith Creveling, CFA - Brent Puff - Ted Harlan, CFA ● Client Portfolio Managers
-
Nathan Chaudoin Bernard Chua, CFA Laura Granger, CFA Jim Shore, CFA
● 8 Investment Analysts ● Located in New York
Source: FactSet
Top 10 Holdings Assets (%)
Holding
Country
Industry
Alphabet Inc
US
Internet Software & Services
4.97
Facebook Inc
US
Internet Software & Services
4.06
Tencent Holdings Ltd
China
Internet Software & Services
3.97
Fortune Brands Home & Security Inc
US
Building Products
3.84
Alibaba Group Holding Ltd
China
Internet Software & Services
3.74
Celgene Corp
US
Biotechnology
3.74
Autodesk Inc
US
Software
3.74
London Stock Exchange Group PLC
UK
Capital Markets
3.72
American Express Co
US
Consumer Finance
3.68
Newell Brands Inc
US
Household Durables
Total
3.66 39.12%
Source: FactSet
Top 10 Overweights Portfolio Weight (%)
Benchmark Weight (%)
Overweight (%)
Fortune Brands Home & Security Inc
3.84
0.02
3.82
Autodesk Inc
3.74
0.05
3.69
London Stock Exchange Group PLC
3.72
0.04
3.68
Alphabet Inc
4.97
1.35
3.62
Newell Brands Inc
3.66
0.06
3.60
Texas Capital Bancshares Inc
3.54
0.00
3.54
American Express Co
3.68
0.16
3.53
Celgene Corp
3.74
0.24
3.49
Tencent Holdings Ltd
3.97
0.49
3.48
Boston Scientific Corp
3.56
0.09
3.47
Holding
Source: FactSet Equity holdings are grouped to include common shares, depository receipts, rights and warrants issued by the same company. Portfolio holdings subject to change without notice.
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Global Concentrated Growth
JUNE 30, 2017
Sector Allocation Portfolio Weight vs. Benchmark 17.75 3.31 1.49 0.21 -0.25
Information Technology
34.64
16.89
Financials
21.96
18.65
Materials
6.60
5.11
Real Estate
3.35
3.14
Industrials
10.61
10.86
Health Care
10.68
11.41
Energy
3.25
6.14
-3.12
Utilities
0.00
3.12
-3.21
Consumer Discretionary
8.91
12.12
-3.23
Telecommunication Services
0.00
3.23
Consumer Staples
0.00
9.35
Contribution to Portfolio Return (%)
Contribution to Benchmark Return (%)
Information Technology
3.96
1.10
Consumer Discretionary
1.37
0.51
Financials
1.40
0.91
Real Estate
0.18
0.13
Telecommunication Services
0.00
-0.01
Materials
0.07
0.12
-9.35 -10.00
Benchmark (%)
-2.89
-0.73
-15.00
Portfolio (%)
Sector
-5.00
0.00
5.00
10.00
15.00
20.00
%
Source: FactSet
Quarterly Sector Performance
Contribution to Return vs. Benchmark
Sector 2.86
0.86 0.49 0.05 0.01 -0.05 -0.11 -0.30 -0.39 -0.45 -0.51 -1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Utilities
0.00
0.11
Energy
-0.63
-0.33
Consumer Staples
0.00
0.39
Health Care
0.30
0.75
Industrials
0.08
0.59
3.50
%
Source: FactSet When shown, "Diversified" includes portfolio holdings that cannot be attributed to a specific GICS sector.
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Global Concentrated Growth
JUNE 30, 2017
Country Allocation: Top 10 Over/Underweights Portfolio (%)
Benchmark (%)
United States
71.56
52.55
China
7.86
3.15
Ireland
3.17
0.15
2.43
France
5.90
3.47
2.43
India
3.42
0.99
United Kingdom
7.06
5.91
Indonesia
1.03
0.28
-
-
-
-
-
-
-
-
-
-
-
-
-1.13
Spain
0.00
1.13
-1.15
Hong Kong
0.00
1.15
-1.18
Netherlands
0.00
1.18
-1.41
Taiwan
0.00
1.41
South Korea
0.00
1.76
Australia
0.00
2.33
Switzerland
0.00
2.80
-3.12
Canada
0.00
3.12
-3.12
Germany
0.00
3.12
Japan
0.00
7.73
Portfolio Weight vs. Benchmark
Country 19.01
4.71 3.02
1.15 0.75
-1.76 -2.33 -2.80
-7.73 -10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
%
Source: FactSet
Quarterly Top Relative Contributors and Detractors by Country Contributor
(%)
Detractor
(%)
China
1.43
Ireland
-0.14
United States
0.70
Switzerland
-0.13
France
0.41
South Korea
-0.09
India
0.38
Germany
-0.07
Australia
0.15
Japan
-0.07
Source: FactSet
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Global Concentrated Growth
JUNE 30, 2017
Risk-Adjusted Performance Three-Year Risk-Adjusted Performance vs. eA Global Large Cap Equity Universe vs. MSCI ACWI-ND, Citigroup 3-Month T-Bill Excess Returns
Tracking Error
Information Ratio
Sharpe Ratio
0
Percentile Rank
25
Median
75
100
●American Century Investments Global Concentrated Growth Excess Returns
Tracking Error
Information Ratio
Sharpe Ratio
Manager
1.75
5.37
0.33
0.52
Percentile Rank
39.00
24.00
51.00
52.00
1.09
3.96
0.34
0.53
Median
Source: eVestment Analytics Excess returns are gross of fees. Number of products in the universe was 362.
Available Vehicles Separate Account
Available in U.S. and certain non-U.S. countries
SICAV
Available only in certain non-U.S. countries.
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Global Concentrated Growth
JUNE 30, 2017
Quarterly Commentary Market Overview Global earnings growth improved for the second-consecutive quarter and global stocks advanced. The market focused on fundamentals as macroeconomic and factor headwinds subsided, rewarding stocks for earnings improvement. Most European markets delivered solid gains, boosted by strong corporate profits. Corporate earnings growth in Europe reached a sixyear high and outpaced earnings growth in the U.S. Investors also were reassured by healthy economic performance, falling unemployment rates, and the victory of centrist candidate Emmanuel Macron in the French presidential elections. U.K. stocks underperformed as the risks and uncertainty around Brexit continued to weigh on growth forecasts. Prime Minister Theresa May also ntered into Brexit talks with the European Union. Japan posted strong returns as earnings exceeded expectations driven by improved capital spending and continued strength in exports. The economy remains in slow-and-steady growth mode, while inflation remains stubbornly low. Key Contributors The ongoing shift to digital advertising and media technology, as well as better-than-expected individual results for internet software and Tencent Holdings, which benefited Honour commerce division. Alphabet is experiencing growth in its Google Drive online data storage and YouTube video site. Also within the sector, Autodesk, a maker of computer-aided design software, gained after better-than-expected first-quarter results, faster adoption of its new cloud-based business model, and subscriber growth. Increasing demand for luxury goods, particularly from China, helped the consumer discretionary sector add to performance. A top contributor was Kering, an operator of luxury brands, which reported accelerating sales and revenue growth amid successful product revitalization in key brands such as Gucci and Yves Saint Laurent. Also, consumer brands owner Newell Brands (Rubbermaid, Mr. Coffee, and others) gained on better-than-expected earnings growth and the announcement of a quarterly dividend increase. Strong individual performance by holdings in the financials sector also helped performance. In capital markets, London Stock Exchange Group, which owns financial exchanges around the world, benefited from increasing use of its derivatives clearing platform. HDFC Bank gained on accelerating loan growth, expanding net interest margins, and lower operating costs. Macroeconomic growth trends in India support continued improvement for the bank. Key Detractors The performance of key detractors during the period was driven by company-specific factors. Despite better-than-expected first-quarter results and solid reductions in unit production and drilling completion costs, stock of energy holding Pioneer Natural Resources fell after management lowered guidance for second-quarter production. We continue to believe Pioneer will benefit from efforts to reduce production costs, while maintaining a well-capitalized balance sheet. Industrial products distributor HD Supply Holdings declined, and we sold our position after management lowered future earnings guidance amid higher commodity costs and tighter margins. Pharmaceutical company Allergan declined after an analyst downgrade. We exited the position, believing recent acquisitions would lead to lower margins and higher expenses. Positioning for the Future Our process continues to be rooted in security selection, but certain broad themes have emerged. terially changed; companies such as Tencent Holdings, Alibaba Group Holding, and Alphabet are beneficiaries of the secular shift of advertising budgets away from traditional media to the online space. Other opportunities in the sector include companies engaged in the expansion of cloud computing, including Autodesk and Adobe Systems, and those enabling the proliferation of secure digital payments, such as Ingenico, which manufactures and installs payment terminals, and charge card firm American Express.
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Global Concentrated Growth
JUNE 30, 2017
Portfolio exposure to financials increased. New positions include London Stock Exchange Group, the operator of financial exchanges, and regional bank Texas Capital Bancshares. London Stock Exchange Group is experiencing an inflection in adoption of its derivatives clearing platform as the demand for financial data increases. Texas Capital Bancshares is expected to benefit from higher interest rates and regulatory relief in the U.S., and we believe it can sustain its strong growth given a combination of continued market share gain in core markets and relatively high leverage to higher U.S. rates. We reduced our exposure to industrials and energy during the period. We exited our position in industrial supplier and distributor HD Supply Holdings, which suffered after disappointing results and increased pressure on margins. In energy, we sold EQT Corp. and trimmed our position in Pioneer Natural Resources, which reduced our exposure to the sector. The portfolio has no exposure in the utilities, telecommunication services, and consumer staples sectors, where we have not seen examples of companies exhibiting the type of sustainable earnings acceleration that fit our investment process. Additionally, we believe We added to holdings in Europe, where increasing domestic demand and economic growth are benefiting individual companies. We have no exposure to developed markets in Asia, where we have been less able to identify companies that fit our investment process.
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Global Concentrated Growth
JUNE 30, 2017
Composite returns are gross of investment management fees. Sector weights, portfolio characteristics and holdings are of a representative account in the composite. Holdings are current as of the date indicated, are subject to change and may not reflect the portfolio's current holdings. Portfolio construction guidelines document operational policies and not necessarily investment restrictions imposed on management of the strategy. Material presented has been derived from industry sources considered to be reliable, but their accuracy and completeness cannot be guaranteed. Opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any American Century Investments® portfolio. Nothing in this document should be construed as offering investment advice. Please note that this is for informational purposes only and does not take into account whether an investment is suitable or appropriate for a specific investor. For purposes of compliance with the Global Investment Performance Standards (GIPS® tment Performance Standards (GIPS®). Global Concentrated Growth composite includes all portfolios managed using a concentrated growth investment strategy primarily targeting large U.S. companies and large non-U.S. companies in developed countries. Index futures (and currency forwards and futures, where applicable or appropriate) are occasionally used to equitize cash and manage portfolio risk. Other derivative instruments may be used, as allowed, as part of the investment strategy. Returns are calculated and stated in U.S. dollars. The return may increase or decrease as a result of currency fluctuations. Returns for periods less than one year are not annualized. To receive a complete list of composites and/or a GIPS® compliant presentation, contact: American Century Investments 4500 Main Street Kansas City, MO 64111-7709 Toll Free: 1-866-628-8826 Fax: 816-340-3931 www.americancentury.com/institutional
American Century Investments 330 Madison Avenue, 9th Floor New York, NY 10017 Toll Free: 1-866-628-8826 Fax: 646-658-7771 www.americancentury.com/institutional
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