Transcript
SP: Hello and welcome to this latest Aubrey update which today focuses on our Aubrey Global Conviction Fund. My name is Simon Pinner. I’m delighted today to be joined by my colleague Andrew Dalrymple. Andrew is founder, director, and CIO at Aubrey, as well as being the lead investment manager of the global emerging markets and global equity strategies. I’m pleased to report that as we move along 2025, the fund has continued to perform strongly. And where better place than to start this update with a look at the drivers behind that performance. Andrew, over to you.
AD: Thanks Simon. I mean, it’s been actually a much easier year than many people would suggest. As you kindly said, the fund is up 10.2% at the end of June which compares pretty well with an MSCI All Countries World Index gain of 0.5%. And of course, we’ve had a huge headwind with the weakness of the dollar, which is really very pleasing.
Actually, we haven’t done a huge amount in terms of changing the asset allocation this year at all. We started the year probably with about 70% in America. We’ve currently got 60% there. We’ve increased Europe slightly, but we resisted the enthusiasm that everybody had for sweeping out of America into Europe, saying this was Europe’s day. We’d always find it slightly difficult to find better European ideas than our American holdings. And we have also pushed up our emerging market weighting in the first six months of the year. We probably started at about 15% at the start of the year. It’s now 25% or thereabouts.
SP: I’m just going to circle back on something there. You mentioned the US, and I’m sure a lot of the viewers today will agree with me when I say we’ve had a lot of chat and discussion about the end of this so-called US exceptionalism. What are your thoughts on this as we head into the second half of the year?
AD: Well, I just take a step back really. I’ve been going to America now more or less twice a year for 20 years, maybe more actually. Every time you come back you feel slightly more positive about your investment prospects. Because it is a great place for finding innovative, hardworking people with a lot of risk capital available. And of course, you’ve got this huge domestic market of 300 million people who sort of think the same way, do the same things, and are comparatively very rich. That huge domestic market gives them an enormous springboard to do things internationally as well.
If you think about it, pretty much everything that we take for granted and use on a daily basis has come from America or been invented in America. You can so often come back from a trip to America having found companies that are capitalised at 20 or 30 billion which you’ve never heard of before, despite the fact you’ve been there multiple times on investment business. We’ve had some great winners in America too. Netflix is up 42%, I think, and Spotify is up 66%. We’ve had very little in the big seven, but even for the last 18 months, I think all of last year, our average in the big seven, the magnificent seven, was only about 11%. And despite that we still generated a 44% return. So, you don’t have to be in these huge index giants just to keep up or beat the index.
SP: So again, if I just continue with that theme closer to home so to speak, how big a role does Europe actually play in the fund at the moment?
AD: Well, I think it’s well within decimal places, It’s about 15% of the fund. We’ve got five holdings, and I have to say they performed extremely well this year. The best performing stock in the portfolio has been Rheinmetall, which we’ve owned now for a year. They make very superior armoured vehicles and a lot of ammunition, and we all know what that’s being used for increasingly.
We bought it in March last year. It had already doubled and so we did so with some trepidation, but it was still only on 20 times earnings and it’s still on about 27-28 times earnings or thereabouts now. We’ve taken more money out of it than we ever put in, and it’s a 3% holding in the fund.
We also bought, very early in the year, a company called VusionGroup which makes electronic price tags for supermarkets. That has been a very fine performer. They got a very good contract not long ago with the Co-op and they won one or two others along the way, and it’s up 42% year-to-date. So, we’re not feeling hard done by in Europe at all-very much the opposite. But have they done better than our American holdings? Not really, no. Not at the moment.
SP: And I guess looking further afield, I’m going to ask you the same question on a country that comes up a lot in discussions we have with clients and prospects-and that is China.
AD: Yeah. One of the problems we had with the fund during our really bad year in 2022 was staying too long at the party in China. As a background, we’d made a huge amount of money there between 2015 and 2021. Of course, China continued with their lockdown far longer, and in a much more protracted and harsher version than anywhere in the West.
When a country comes out of a lockdown like that, we thought animal spirits would be restored and we felt we had to be there for that moment. But it kept on being prolonged and the market just dribbled away and died on us. When they finally did unlock, the property crash had already amplified itself over the preceding 18 months and animal spirits in China are very, very low.
It would be nice to think things are improving but they’re not really, regressively. We long for them to do so, but the property market is still in dire condition. Most Chinese families’ property accounts for about 80% of their net asset value. If that’s come down by 40-50%, or has already done so, you’re not feeling very rich or extravagant.
It’s been a very tough market. Valuations are pretty attractive at the moment. The question is whether they’ll be re-rated upwards or not, and that’s the big dilemma we’re facing. Certainly, employment numbers and consumer sentiment data aren’t giving great encouragement. Chinese bond yields have been absolutely crushed, down at 1.6% and staying there-showing no signs of a reflation dynamic coming through the economy.
SP: I can see from the latest factsheet with the end of June data that India makes up just over 8% of the fund. What are the reasons behind that? That’s an area we continue to get a lot of interest in.
AD: Thanks. I’m an unashamed and long-term huge bull of India. Very dynamic, commercial, business-savvy people. You go there, and you come back feeling very positive indeed. The long-term opportunities in India are simply outrageous.
Everyone always says the market is far too expensive, and indeed the market PE is about 21, which is far higher than most emerging markets. But I would say the long-term opportunities justify a premium.
At the moment, we’re really only dealing with the top 10% of the population, about 150 million people, who’ve got enough money to spend. But every year, with the economy growing, that increases. That’s why the opportunity is so exciting.
We own IndiGo, which is the largest Indian airline. People don’t tend to like airlines, but this airline has nearly 400 airplanes, operates 2,000 flights a day, and has a 64% share of the Indian airline market. It’s going gangbusters. Indian air travel is growing at about 11–12% a year, and it’s cost competitive with Indian railways. The growth, we think, is just going to be a multi-year opportunity.
Ditto with telephones-we own Bharti Airtel, which is not quite the dominant but the best mobile telephone operator in India. India is getting wired up with astonishing speed. Five years ago, 200 million people had a mobile telephone; now it’s 800 million and going up. The need for data and mobile access has become part of everybody’s lives just as in the West. Again, it’s a huge long-term opportunity.
SP: Thank you very much. Thank you everybody for watching this update. Please don’t hesitate to get in touch with your usual Aubrey representative if you have any questions or if we can help with any further information. We’ll be delighted to help.
Disclaimer
This is a marketing communication issued by Aubrey Capital Management Limited which is authorised and regulated in the UK by the Financial Conduct Authority and is registered as an Investment Adviser with the US Securities & Exchange Commission. You should be aware that the regulatory regime applicable in the UK may well be different in your home jurisdiction Aubrey Capital Management has taken reasonable care to ensure the accuracy of this information at the time of publication but it is subject to change without notice and it does not in any way constitute investment advice or an offer or invitation to deal in securities.
Past performance is not a guide to future returns and may not be repeated. All performance data for the SVS Aubrey Global Conviction Fund Retail A Accumulation share class. Fund Source: Aubrey Capital Management. Performance data is calculated on a net basis by deducting fees incurred at fund level (e.g. the management fee and other fund expenses), save that it does not take account of initial charges or switching fees (if any). Income reinvested is included on a net of tax basis. Index Source: MSCI, MSCI AC World Index Net GBP income reinvested net of tax.
Please refer to the prospectus and the KIID before making any final investment decisions and if you are still unsure, seek independent professional advice. Investors in the Fund are exposed to fluctuations in the Fund’s value, which can go down as well as up, and may be subject to significant volatility due to market conditions and changes in foreign exchange rates.
Aubrey Capital Management Limited accepts no liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. This document does not in any way constitute investment advice or an offer or invitation to deal in securities. Recipients should always seek the advice of a qualified investment professional before making any investment decisions. The Fund is not registered for sale in the United States and is not available to, or for the benefit of, U.S. persons as defined by U.S. securities laws.
