Download the Global High Conviction Fund - Unhedged and Hedged Fund Update

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This update is for the BlackRock Global High Conviction Fund - Unhedged and BlackRock Global High Conviction Fund - Hedged (formerly known as the BlackRock Global Titans Fund and BlackRock Hedged Global Titans Fund).

Gross performance returns and benchmark performance shown do not include expenses, fees or tax. Net performance returns are prepared on an exit-to-exit fee basis which includes all ongoing fees and expenses.

Market Review

• The quarter started with intensified Greek debt problems. Greek bond yield spreads over bunds widened to record levels and sovereign CDS rose.
• Sovereign downgrades of Greece, Portugal and Spain added to concerns in the euro area with risk aversion dominating in May, as concern about euro area debt problems showed no signs of abating.
• Banking sector worries resurfaced after one of Spain’s largest regional lenders was bailed out by the Spanish Central Bank.
• Range-bound, but choppy financial markets dominated in June and sentiment towards risk was fragile.
• The euro area banking sector stress showed little signs of abating, despite news that bank stress tests would be conducted and the promise to recapitalize banks that need it.
• China’s policy tightening measures also remained an issue after measures to cool its property market started to take effect.
• Over the quarter, defensive sectors such as Telecommunications and Utilities outperformed the market, while Financials, Materials and Energy lagged.

Fund Review

• Energy was the largest detracting sector, as a result of the Horizon explosion in the Gulf of Mexico. Transocean and Anadarko were two stocks in the Fund that were directly related to the spill.
• The share price of South Korea’s LG Electronics was weak, on concerns that margins in its LCD television operations would be vulnerable to the weak euro.
• In Consumer Discretionary, Dreamworks Animation was weak after the company reported far lower box office numbers for the final “Shrek” film than investors had anticipated.
• Elsewhere in the consumer area, however, German vehicle manufacturer Daimler contributed to performance by raising its profit forecast for its Mercedes-Benz division in May for the second time in six weeks. DirecTV delivered first-quarter results that were received well by the market, which included a 14% increase in revenues.

Fund Outlook

• Many central banks and governments are now reducing monetary and fiscal stimuli. While this has caused economic indicators to roll over to more normalised levels, we think this is natural, given the phase of the economic cycle. We therefore believe that many investors are overly pessimistic about the prospects for longer-term global growth.
• This weakness has allowed us to find strong companies, trading below what we believe is fair value. Our analysis suggests that equities are still looking reasonably valued, particularly relative to bonds.
• In an environment where equities have moved away from extremes in terms of sentiment, valuation and earnings expectations, we continue to favour stocks that offer growth at a reasonable price (“GARP”).

About Fund

Investment objective

The primary aim of the Global High Conviction Fund is to seek to maximise capital growth over the medium to long term by investing in a select portfolio of international assets. The Fund aims to outperform the MSCI World Index, ex-Australia (unhedged/hedged in $A).

Fund strategy

The Fund’s investment strategy emphasises bottom-up stock research which is conducted along global lines to identify undervalued companies. The strategy focuses on mid to large capitalisation stocks. The Fund is available on a hedged and unhedged basis.

Designed for investors who…

• Seek an international share portfolio.
• Accept the risk of fluctuations in global share markets and currencies.
• Have a longer term investment horizon.
• For the hedged version, seek to reduce the impact on A$ returns on those investments that result from currency exposure.
  
  

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