SJB | Korschenbroich, 07.10.2022.
Im August entwickelte sich die SmartCity-Strategie schwächer als die globalen Aktienmärkte. Während der MSCI World um 2,33 Prozent in Euro nachgab, verzeichnete der Pictet – Smart City P EUR (WKN A1CYMG, ISIN LU0503634577) eine Wertentwicklung von -2,58 Prozent. Alle drei Untersegmente des Fonds trugen zu diesem Ergebnis bei, vergleichsweise stark entwickelte sich der Bereich “Intelligent Buildings“. Pictet-FondsManager Ivo Weinöhrl thematisiert in seinem aktuellen Monatsbericht für August die wichtigsten Veränderungen im Portfolio und gibt Investoren der FondsStrategie SJB Nachhaltig einen Ausblick für die Aktien, die von den Entwicklungen hin zur modernen Stadt profitieren.
Market Review
Throughout most of August, global equity markets appeared to be able to hold on to their gains realised in July. With the rate of inflation having potentially peaked, market participants saw an increased chance of a Federal Reserve (Fed) pivot. However, the summer rally ended on August 26th, when Fed Chairman Powell indicated at the Jackson Hole Economic Symposium that it was too early to soften the restrictive monetary policy stance intended to lower inflation. This event rattled financial markets and the MSCI All Country World Index (in USD terms) ended the month with a -3.6% negative return. From a regional perspective, Europe saw the largest drawdown. Fears around the security of energy supply weighed on the economic outlook of the old continent as both gas and electricity prices surged to new alltime highs. These price spikes were triggered by Russia stopping gas shipments through the Nord Stream 1 pipeline once again for unscheduled maintenance while a hotter-than-usual summer caused severe droughts that curtailed the ability of hydroelectric and nuclear power plants to produce. From a sector perspective, Energy was the only group of stocks posting a positive return. Rate sensitive areas, such as Technology and Real Estate, found themselves at the bottom of the spectrum as the yield on 10-year US Treasuries increased by more than half a percentage point to almost 3.2%.
Performance Analysis
In August, the SmartCity strategy underperformed global equities. This result was driven by all three segments. Within Building the City, Intelligent Buildings showed notably strong performance. Schneider Electric’s share price almost completely reversed the previous month’s positive performance when good half year results had driven the stock up. The market’s sentiment markedly changed in August and concerns about a deteriorating economic outlook took centre stage again. This was a common theme among our holdings in the industrials space. In Living in the City, two investments hurt our performance. The first, a video communication provider, reported worse-than-expected results and lowered its outlook as previous expectations around postpandemic consumer behaviour proved too optimistic. The second, a childcare operator, reported a miss on both revenues and profits. The company continues to suffer from labour shortages that impact both its ability to meet demand as well as margins due to higher wages. On the positive side, our investment in a self-storage provider continued its positive performance after significantly beating results expectations. Running the City was also negatively impacted by macro concerns. Many of our investments in both the Traditional Infrastructure and Digital Infrastructure subsegments performed poorly despite reporting good results.
Portfolio-Activity – Overweightings and Underweightings
During the month of August, there were no major changes to the portfolio. We exited one small position in an early-stage financial solution provider, which operates a digital platform that enables a faster, cheaper and more secure way for immigrants, working and living in the US to send money back to their home countries. Unfortunately, the long-awaited clarity around the sustainable level of profitability of the business has still not been provided, which led us to exit the position and concentrate the portfolio even further to now 54 holdings. Other than that, no significant shifts in our positioning were recorded.
Market Outlook
The secular outlook for the three building blocks of our SmartCity strategy remains highly attractive. Cities around the globe have recognised the need to invest in their aging infrastructure and deploy smarter solutions and technologies to improve their citizens’ quality of life. Since the start of the year, the market’s attention has focused on analysing and predicting the future trajectory of inflation, which is currently running at multi-decade highs in many parts of the world, as well as the respective monetary policy responses aimed at bringing it back down. An expectation that a recession would arrive rather sooner than later had brought long-term interest rates back down over the course of July and early August, in turn fuelling a rally in equities, only to abruptly reverse shortly thereafter. The macroeconomic picture remains blurry, and the market’s assessment of both economic and monetary policy conditions seems to be caught up in a zigzag pattern, swinging wildly from one end to another. We are not taking a strong view either way as we think predicting the exact timing of a potential recession and/or a monetary policy pivot is futile. Instead, our strategy of late has been to focus even more than before on companies possessing pricing power, high visibility of earnings and cash flows and low financial leverage.
Portfolio Strategy
Our goal is to gain exposure to companies that stand to benefit most from their ability to provide solutions to the meaningful challenges posed by rapid urbanization as well as changing demographics and consumer lifestyles. In light of fast-growing populations, cities around the world will have to undertake investments to protect human well-being and promote environmental sustainability. We find companies across a wide variety of sectors that make cities smarter, i.e. more efficient, sustainable, safer or better adapted to their citizens’ needs. The investment strategy is unconstrained across geographies, market capitalizations or sectors.
Pictet – Smart City Management Team
Ivo Weinoehrl
Lucia Macaccaro
