QUARTERLY INVESTMENT REVIEW Q1 2021 - QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES
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QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
Q U A R T E R LY I N V E S T M E N T R E V I E W Q 1 2 0 2 1
QUILTER CHEVIOT GLOBAL INCOME
AND GROWTH FUND FOR CHARITIES
1
QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
TABLE OF CONTENTS
MANAGERS’ MARKET COMMENTARY 3
PORTFOLIO AND PERFORMANCE OVERVIEW 5
PORTFOLIO VALUE AND ALLOCATION 6
PORTFOLIO ASSET ALLOCATION BREAKDOWN 7
EQUITIES SECTOR ALLOCATION 9
TOP 20 HOLDINGS 10
TOP 10 CONTRIBUTORS AND TOP 10 DETRACTORS 11
ASSET ALLOCATION ANALYSIS - EQUITIES 12
REGIONAL ALLOCATION & ATTRIBUTION ANALYSIS - EQUITIES 14
ATTRIBUTION SUMMARY - EQUITIES 16
KEY PORTFOLIO ACTIVITY 17
VOTING AND ENGAGEMENT 21
PORTFOLIO HOLDINGS 22
DISCLAIMER 31
2QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
MARKET COMMENTARY
QUARTER ENDED 31 MARCH 2021
This was a challenging quarter for the Fund with the continued market bias Business optimism surveys in recent days confirm that the economic recovery
towards value stocks, especially those liable to benefit in the short-term from continues and, if anything, at a slightly stronger pace than previously expected
a ‘re-opening trade’ and financials, in particular banks. In part, a reaction to a suggesting positive surprises in the period ahead. Whilst acknowledging that for
sharp rise in the majority of global sovereign yields over fears of a significant the present, Covid-19 data remains the modern definition of the Curate’s egg, in
and sustained increase in inflation and belief that interest rates would need some parts of the world it is not just bad, but troublingly so. Nonetheless, the
to rise to cushion any concerns that economies, emerging from the grip of IMF is forecasting global growth of 6% this year and 4.4% next year. We first saw
Covid-19, might overheat. improvements in manufacturing, which continue, and now we are seeing strong
rises in business optimism amongst services companies. The rate of recovery was
Given this backdrop we did make some changes within our equity positioning;
expected to slow in China, but the latest surveys suggest otherwise.
notably we increased our exposure to energy and financials at the expense
of health care, as well as trimming positions to take profits in technology (or Domestically, the UK’s progressive vaccination programme has already helped
technology related companies) which have driven market returns for so much of manufacturing sentiment and we expect services to follow suit. In the US, some
the recent time. Beyond reviewing our financial weightings and the occasional sentiment metrics are the highest on record and encouragingly broad based
‘re-opening’ opportunity, overall, we are not proposing a radical reorganisation possibly reflecting the Biden administration proposals for further fiscal stimulus,
amongst our equity selection or asset allocation. We retain a preference to which in many ways mark this current period as a US-led global recovery. Labour
overseas markets. In the short-term, the recovery in sterling proved a headwind, markets are picking-up in the US especially in Covid-19 sensitive sectors, reflecting
but long-term we see greater opportunities abroad. vaccine progress as well as better weather.
The Fund lagged the performance comparator over the quarter by 2%. As US companies could be subjected to a corporate tax hike, proposed by President
commented above, the lack of exposure to the value part of the market was Joe Biden, to fund a $2 trillion infrastructure improvement plan, separate to the
not helpful, however it was the Fund’s underweight positioning to the UK that recent $1.9 trillion stimulus package recently rolled out. The infrastructure package
was particularly challenging. Pleasingly, the Fund is ahead of the performance is an initial phase that seeks (amongst other things) to improve the crumbling
comparator for the year and since inception. roads and bridges across America. However, if approved, the programme would
likely run over the next 10-14 years, and therefore not an immediate catalyst for
In terms of income, we believe that the environment for investors will continue to
change. With that said, the potential corporate tax hikes might not be instant
improve after a brutal year of dividend cuts and suspensions. As economies continue
but rather phased in over the next few years, alongside new agreements of
to re-open and business and consumer confidence continues to grow, the outlook
establishing a global ‘fair’ corporation tax playing field.
is positive, albeit movement is most likely to centre on the final quarter of this year
and beyond, as optimism translates into increased earnings and profitability.
3QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
MARKET COMMENTARY contd.
Input pricing pressures and supply disruption feature in most surveys, but these are likely to prove transitory – unlike the Ever Given in the Suez canal, a ship that
almost every retailer is currently citing as an excuse to explain why the item you ordered is still not in stock. Central banks, especially the US Federal Reserve have
also continued to suggest that they are less likely to curtail inflationary moves with pre-emptive rate hikes. In the short-term, as ever, it plays not to ‘bet against the
Fed’. Even though 20 percent of all US dollars in circulation were created over the last 12 months, for the moment the music is very much still playing, and market
optimism is rife.
Commentators have also focused on the significant increase in household savings during the period. If unleashed, as suggested, this has the potential to act as a
further, significant boost to economies. There are some concerns that any such spending fillip could prove temporary. Additionally, data suggests that low income
households, most likely to have suffered the economic impacts of the pandemic, have run down savings, further adding to the cacophony of calls to raise taxes on
firms and individuals that have benefited throughout the pandemic.
In summary, the global recovery, whilst imperfect, is underway, although Covid-19 will continue to be a feature and concern. The situation in Europe has been heavily
commented in the press, alongside the challenges faced in South America, Africa and other emerging markets, most notably India. Against this, global vaccination
programmes, providing optimism and controversy in equal measure, underpin the ongoing transition back to a form of normality, along the way, aided by significant,
ongoing global monetary and fiscal stimulus. Geo-political risks remain ever present, but for now we remain optimistic about the future long-term prospects for
investors and do not advocate any major change in strategy.
Howard Jenner Gemma Woodward
Executive Director Executive Director
4QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO OVERVIEW
AS AT 31 MARCH 2021
FUND NAME QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES
Investment Mandate To grow the capital value and provide income over the long-term
Benchmark CPI +3.5%
Inception Date 08 January 2020
Lead Portfolio Managers Howard Jenner, Gemma Woodward
Total Assets (GBP) £80,859,470.78
PERFORMANCE OVERVIEW
TO 31 MARCH 2021
3 MONTHS 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION SINCE INCEPTION
% % % % CUMULATIVE % ANNUALISED %
Quilter Cheviot Global Income and Growth Fund for Charities 0.2 24.7 – – 9.9 8.0
Performance Comparator - composite of market indices* 2.2 24.3 – – 4.8 3.9
Relative Return -2.0 0.3 – – 5.1 4.1
* 12% FTSE Actuaries All Gilts, 5.5% ICE BofA ML Sterling Corporate Bonds, 35% FTSE All Share, 35% FTSE World ex UK, 10% alternatives (50% FTSE Actuaries UK Conventional Gilts up to 5
years/50% FTSE All Share), 2.5% UK interbank 1 year. Past performance is not a reliable indicator of future results.
5QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO OVERVIEW
FOR THE PERIOD 31 DECEMBER 2020 TO 31 MARCH 2021
FUND NAME £ VALUE
Value at Beginning of Period 74,410,734.13
Net Contributions/Withdrawals 6,207,142.52
Realised Gains and Losses -217,919.19
Unrealised Gains and Losses -152,473.55
Cash Dividends 611,986.87
Cash Interest -
Value at End of Period 80,859,470.78
INCOME DISTRIBUTIONS
Date of Distribution Distribution per Unit
31 May 2020 0.6845p
31 August 2020 0.7331p
30 November 2020 0.6114p
28 February 2021 0.6231p
6QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO ASSET ALLOCATION
Fixed Interest 12.93%
United Kingdom 26.23%
North America 22.05%
Europe ex. UK 9.37%
Japan 3.46%
Asia Pacific ex. Japan 3.47%
Emerging Markets 2.96%
Global 0.89%
Alternative Investments 15.21%
Cash* 3.43%
* Includes unsettled subscriptions to the Fund and unsettled trades.
7QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO ASSET ALLOCATION
PORTFOLIO POSITIONING VERSUS THE PERFORMANCE COMPARATOR*
Fixed Interest
UK Equities
Overseas Equities
Alternative Investments
Cash**
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
Performance Comparator - composite of market indices* Quilter Cheviot Global Income & Growth Fund for Charities
*12% FTSE Actuaries All Gilts, 5.5% ICE BofA ML Sterling Corporate Bonds, 35% FTSE All Share, 35% FTSE World ex UK,
10% alternatives (50% FTSE Actuaries UK Conventional Gilts up to 5 years/50% FTSE All Share), 2.5% Bank of England Base Rate
** Cash position includes unsettled subscriptions to the Fund and unsettled trades.
8QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
EQUITIES SECTOR ALLOCATION*
12%
10.94%
10.62%
10.01%
10%
8%
6.89%
6.13%
6% 5.70%
4%
2.95%
2.03%
2% 1.65% 1.66%
0.68%
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* Shown as percentage of total fund value
9QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
TOP 20 HOLDINGS
AS AT 31 MARCH 2021
HOLDING COUNTRY SECTOR WEIGHT %
Royal London Unit Trust Managers Sterling Credit United Kingdom Other UK Fixed Interest 3.79
Baillie Gifford & Co Japanese Income Growth Japan Equity Investment Instruments 3.46
Pimco Global Investment Grade Credit Fund Hedged Global Fixed Interest - Overseas 2.96
United Kingdom(Government Of) 4.5% Snr Bds 07/12/2042 United Kingdom UK Government Securities 1.72
M&G United Kingdom Financials 1.69
Rio Tinto United Kingdom Basic Materials 1.65
International Public Partnerships United Kingdom Alternative Investments - Infrastructure 1.61
Microsoft United States Technology 1.56
HICL Infrastructure United Kingdom Alternative Investments - Infrastructure 1.55
Legal & General United Kingdom Financials 1.48
Amazon United States Consumer Discretionary 1.44
Foresight Solar Fund United Kingdom Alternative Investments - Infrastructure 1.43
BMO Property Growth and Income United Kingdom Alternative Investments - Property 1.42
Apple United States Technology 1.37
Unilever United Kingdom Consumer Staples 1.32
Alphabet United States Technology 1.26
Tesco United Kingdom Consumer Staples 1.25
The Renewables Infrastructure Group United Kingdom Alternative Investments - Infrastructure 1.25
Matthews Asia SICAV Asian ex Japan Group Asia Pacific Ex Japan Equity Investment Instruments 1.25
Wells Fargo Emerging Markets Equity Income Emerging Markets Equity Investment Instruments 1.24
10QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
TOP 10 CONTRIBUTORS AS AT 31 MARCH 2021
HOLDING SECTOR CONTRIBUTION TO RETURN
JPMorgan Chase Financials 0.20
Alphabet Technology 0.19
M&G Financials 0.18
ASML Technology 0.16
Vodafone Telecommunications 0.11
Trane Technologies Industrials 0.10
Total Energy 0.10
Prudential Financials 0.09
D S Smith Industrials 0.09
Ares Management Financials 0.09
TOP 10 DETRACTORS AS AT 31 MARCH 2021
HOLDING SECTOR CONTRIBUTION TO RETURN
United Kingdom(Government Of) 4.5% Snr Bds 07/12/2042 UK Government Securities -0.22
London Stock Exchange Financials -0.22
Apple Technology -0.17
United Kingdom(Government Of) 1.5% Snr Bds 22/07/2047 UK Government Securities -0.12
Amazon Consumer Discretionary -0.12
Experian Industrials -0.10
Pimco Global Investment Grade Credit Fund Hedged Fixed Interest - Overseas -0.09
Advanced Micro Devices Technology -0.09
Royal London Unit Trust Managers Sterling Credit Other UK Fixed Interest -0.08
United Kingdom(Government Of) 0.125% Index Linked Bds 22/11/2036 UK Index Linked Securities -0.08
11QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
SECTOR ASSET ALLOCATION & ATTRIBUTION ANALYSIS - EQUITIES
SECTOR ALLOCATION COMPARISON – DIRECT EQUITY POSITIONS ONLY (REBASED TO 100)
Energy
Basic Materials
Industrials
Consumer Staples
Health Care
Consumer Discretionary
Telecommunications
Utilities
Financials
Real Estate
Technology
-10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00
Difference Performance Comparator Quilter Cheviot Global Income & Growth Fund for Charities
12QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
SECTOR ASSET ALLOCATION & ATTRIBUTION ANALYSIS - EQUITIES
QUARTERLY SECTOR ATTRIBUTION – DIRECT EQUITY POSITIONS ONLY
ALLOCATION SELECTION (INCL. INTERACTION) TOTAL ATTRIBUTION EFFECT
Real Estate -0.01 0.02 0.00
Telecommunications -0.01 0.00 -0.01
Utilities -0.06 -0.04 -0.10
Industrials -0.21 0.07 -0.14
Consumer Staples -0.36 0.20 -0.16
Technology 0.07 -0.24 -0.17
Energy -0.28 -0.03 -0.31
Basic Materials -0.36 -0.01 -0.37
Health Care -0.44 0.07 -0.37
Financials -0.51 0.13 -0.39
Consumer Discretionary -0.64 -0.17 -0.81
Total -2.80 -0.14 -2.94
13QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
REGIONAL ASSET ALLOCATION & ATTRIBUTION ANALYSIS - EQUITIES
SECTOR ALLOCATION COMPARISON - DIRECT EQUITY POSITIONS AND FUNDS HOLDINGS (REBASED TO 100)
United Kingdom
North America
Europe ex UK
Asia Pacific ex Japan
Japan
Emerging Markets
Global
-20.00 -10.00 0.00 10.00 20.00 30.00 40.00 50.00 60.00
Difference Performance Comparator Quilter Cheviot Global Income & Growth Fund for Charities
14QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
REGIONAL ASSET ALLOCATION & ATTRIBUTION ANALYSIS - EQUITIES
SECTOR ALLOCATION COMPARISON - DIRECT EQUITY POSITIONS AND FUNDS HOLDINGS
ALLOCATION SELECTION (INCL. INTERACTION) TOTAL ATTRIBUTION EFFECT
Emerging Markets 0.23 -0.03 0.19
Japan 0.03 0.00 0.03
Europe ex UK 0.04 -0.09 -0.06
Global -0.06 0.00 -0.06
Asia Pacific ex Japan -0.15 0.00 -0.15
United Kingdom -1.37 0.18 -1.19
North America -1.39 -0.16 -1.54
Total -2.66 -0.13 -2.79
15QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
ATTRIBUTION SUMMARY - EQUITIES
FUND AVERAGE TOTAL
SECURITY BENCHMARK WEIGHT
TOP TEN CONTRIBUTORS REGION SECTOR WEIGHT - ACTIVE ATTRIBUTION
RETURN - AVERAGE
AVERAGE WEIGHT EFFECT
JPMorgan Chase North America Financials 22.92 1.64 0.37 1.33 0.21
ASML Europe ex UK Technology 22.56 1.34 0.19 1.23 0.19
Alphabet North America Technology 17.17 2.10 0.49 1.63 0.19
M&G United Kingdom Financials 10.78 2.52 0.11 2.74 0.18
Trane Technologies North America Industrials 14.71 1.24 0.03 1.27 0.12
Total Europe ex UK Energy 9.25 1.39 0.09 1.70 0.11
Ares Management North America Financials 11.15 1.36 0.00 1.42 0.09
D S Smith United Kingdom Industrials 9.50 1.59 0.11 1.53 0.07
Persimmon United Kingdom Consumer Discretionary 10.10 1.35 0.20 1.20 0.07
Vodafone United Kingdom Telecommunications 9.64 1.97 0.77 1.18 0.06
FUND PERFORMANCE AVERAGE TOTAL
SECURITY
TOP TEN DETRACTORS REGION SECTOR WEIGHT - COMPARATOR WEIGHT ACTIVE ATTRIBUTION
RETURN
AVERAGE - AVERAGE WEIGHT EFFECT
London Stock Exchange United Kingdom Financials -23.03 1.54 0.63 0.63 -0.25
Amazon North America Consumer Discretionary -7.85 2.58 1.15 1.33 -0.19
Adobe North America Technology -7.34 1.67 0.19 1.44 -0.17
HSBC United Kingdom Financials N/A 0.00 1.88 -1.90 -0.17
Experian United Kingdom Industrials -10.57 1.58 0.52 1.11 -0.16
Advanced Micro Devices North America Technology -18.34 0.73 0.09 0.54 -0.15
Apple North America Technology -11.01 2.53 1.77 0.69 -0.15
Merck North America Health Care -4.64 1.86 0.17 1.76 -0.14
BP United Kingdom Energy N/A 0.00 1.28 -1.29 -0.14
Ocado United Kingdom Consumer Staples -10.31 1.36 0.26 1.06 -0.14
16QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
KEY PORTFOLIO ACTIVITY
FOR THE PERIOD 31 DECEMBER 2020 TO 31 MARCH 2021
SIGNIFICANT PURCHASES REGION SECTOR RATIONALE
Rio Tinto United Kingdom Basic Materials We added to Rio Tinto to increase cyclicality within the Fund’s exposure; we view
it as the most defensive and cash generative of the diversified miners. The stock
trades on a 2021 EV/EBITDA multiple of 5.3x with an ordinary dividend yield of
7.3%.
Royal Dutch Shell United Kingdom Energy Added to the holding to reduce the underweight position to the Energy sector, and
increase the cyclicality within the Fund's exposure. Pleasingly, Shell is increasing
the dividend in Q1 2021, providing overall yield of 3.8%.
Total Europe Ex. UK Energy We believe that Total's valuation discount to the sector is unwarranted and the
dividend yield attractive. Total will propose a name change at its upcoming AGM
to TotalEnergies, this is consistent with its climate transition strategy.
Renishaw United Kingdom Industrials Increased exposure to industrials and Chinese manufacturing recovery.
Siemens Europe Ex. UK Industrials Increased exposure to industrials and Chinese manufacturing recovery.
Adidas Europe Ex. UK Consumer The rise of athleisure wear has been a key trend that has been given further
Discretionary impetus during the Covid-19 work from home period. Adidas is a leader within the
sector and sales have been growing strongly driven by Asia and the USA with the
prospect of further growth to come. The management team is delivering good
margin improvements and the business generates sufficient cash to fund higher
dividends and share buybacks.
17QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
KEY PORTFOLIO ACTIVITY
FOR THE PERIOD 31 DECEMBER 2020 TO 31 MARCH 2021
SIGNIFICANT PURCHASES REGION SECTOR RATIONALE
Sampo Europe Ex. UK Financials Sampo is an insurance group providing life assurance and non-life insurance in
the Nordic countries and Baltic states. It has partly used the funds raised through
selling its own bank to buy more than 20% in Nordea, the Nordic banking group.
Sampo has a reasonable valuation and dividend, as non-life insurance sector is
generally a non-discretionary spend for customers we believe this makes the
company an attractive proposition.
ING Europe Ex. UK Financials ING is a Dutch-based bank with a presence in over 40 countries. Among the
European banks, we continue to like ING for its digital business model with the
fall-out from Covid-19 accelerating the transition towards digital and away from
the traditional branch network. The bank offers a mix of mature and growth
markets with a focus on digital innovation which supports the outlook for earnings
growth, with the intention to pay >10% dividend yield this year (if permitted by
the regulator).
VH Global Sustainable Alternatives Infrastructure Increasing our infrastructure exposure, the trust's philosophy aims to tackle
Energy Opps structural gaps in global energy markets through owning assets which are
focused on accelerating energy transition. The trust focuses on the less competed
for mid-market assets and is expected to be diversified across technologies and
countries, with a 5% dividend yield through purchasing an enhanced pipeline of
global assets in proven technologies across OECD countries.
18QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
KEY PORTFOLIO ACTIVITY
FOR THE PERIOD 31 DECEMBER 2020 TO 31 MARCH 2021
SIGNIFICANT SALES REGION SECTOR RATIONALE
Reckitt Benckiser United Kingdom Consumer Reckitt Benckiser has served us well over 2020 with its product range benefitting
Discretionary from the market environment. We feel this is an opportunity to reduce our
exposure to consumer discretionary and add more cyclicality into the Fund.
AstraZeneca United Kingdom Health Care We reduced the position in AstraZeneca which is currently trading on a 2021 P/E
of 20x, a significant premium to peers; health care has had a mixed experience
during Covid-19 and we are reducing the overall exposure. We prefer non UK
pharma.
GlaxoSmithKline United Kingdom Health Care We have sold the position in GlaxoSmithKline reflecting our wish to reduce the
health care exposure within the Fund as well as exiting our lowest conviction
holding.
Pfizer North America Health Care We have sold the position in Pfizer as part of our decision to reduce the overall
weighting to pharma within the Fund. We believe that there are more interesting
opportunities in the names we continue to hold.
Apple, Amazon, North America Technology Taking profit from the technology related names (whether they are part of the
Adobe, Facebook, and Consumer technology sector for listing purposes or not) in order to reduce the US exposure
Microsoft and Netflix Discretionary (which served us well in 2020) as well as the overall exposure to technology.
19QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
VOTING AND ENGAGEMENT
QUARTER ENDED 31 MARCH 2021
Below we have outlined some examples of our engagement during the three individual school – including photographing every batch of parcels when it goes
months to the end of March 2021. In line with SRD II disclosure regulations we out. In addition to this, they have set up a free helpline for concerned schools and
have, in the majority of cases, included the name of the company or fund. In some parents. This is a difficult time for households, particularly those on free school
cases we will not, as this would be unhelpful in the long-term to the ongoing meals and we believe the measures the company have now put in place will work
engagement process. well to resolve current shortcomings and mitigate future ones.
We use ISS as our proxy voting service provider and based on our responsible Outcome: we gained a greater understanding of the challenges facing the
investment principles, ISS provides recommendations on each resolution company as well as the remedial action. This is an ongoing engagement.
companies put forward to shareholders. We do not always follow the ISS
recommendations as, we believe, it is important that as responsible investment is
integrated into our investment process, Quilter Cheviot makes up its own mind. HICL INFRASTRUCTURE
In all cases where we have a concern regarding a company, we make contact to Objective: general discussion regarding the investment trust.
discuss the issues ahead of the AGM.
This was an initial meeting with the Chair of HICL Infrastructure. Topics discussed
included board succession, along with the fund’s Net Zero carbon aspirations.
COMPASS GROUP Plans are by no means concrete but it is a topic they are exploring – the main
hurdle will be working out how to decarbonise assets where they do not hold
Objective: to gain further information regarding the food parcels Compass had
a majority stake and are largely reliant on operators and clients to reduce the
supplied to school children.
carbon footprint. They have embedded ESG criteria into the incentives of staff
Compass’ Chartwells subsidiary was implicated in a controversy relating to members at the underlying investment manager. We have requested more
supplying inadequate food parcels to school children. We engaged with the information to better understand specific performance criteria and thresholds.
company to understand what happened. We were reassured by their quick actions Sustainability issues and how these can be embedded into board processes are
and believe they are behaving in the right way. Compass’ shortcomings (2% of all on the radar, but it will be helpful to hear more on specific developments moving
parcels) came from limited time to prepare (less than 12 hours’ notice of school forward. Given the board rotation taking place – improving the ESG skillset on the
closures), supply chain shortages and lack of quality checks. They have resolved board should be an area of focus for future engagement.
the supply chain issues and seem to have the right quality controls in place. They
Outcome: continue to monitor the developments regarding disclosure and
have committed that they will not charge the schools affected by any shortage
sustainability.
and created extra quality assurance checks at the supplier level and within each
20QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
VOTING AND ENGAGEMENT
QUARTER ENDED 31 MARCH 2021
HALMA ASSURA
Objective: discuss proposed changes to the remuneration policy. Objective: remuneration policy consultation.
We spoke to the Remuneration Committee Chair to discuss the proposed A discussion with the Chair of the Remuneration Committee, as part of the
changes to the remuneration policy being presented at the 2021 AGM. They are shareholder consultation on the remuneration policy that will be put forward at
aware that there is a sensitivity around proposed executive pay increases and the 2021 AGM. Main changes included an increase to CEO and CFO salaries as
see this as a resetting of compensation away from FTSE 250 levels towards well as alignment of executive and wider workforce pension contributions. Our
FTSE 100, which the company is now a constituent member of. No government discussion centred on the appropriateness of the pay rise and the benchmarking
funded furlough schemes have been used during the Covid-19 crisis. Company used by the Remuneration Committee to arrive at the decision. One difficulty has
performance has been strong, and we understand the retention/succession been benchmarking salaries effectively as they do not have many direct peers in
planning concerns. We are supportive of the changes but would like to see more the health property sector. Based upon our discussion, we are broadly supportive
information on how future remuneration could be better benchmarked against a of the proposal. This does appear to be a genuine effort to bring the CEO/CFO
more specific peer group as the FTSE is relatively diverse. More information on remuneration up to market. They have not used government assistance during
how Halma benchmarks ESG performance versus peers has also been requested. the Covid-19 crisis and deferred 2020 proposed increases while taking short-term
We will monitor progress on inclusion of ESG metrics in executive pay and have temporary salary cuts at the height of the crisis. The potential expense and salary
encouraged an acceleration of this process. We discussed efforts to improve of external recruitment is also an understandable concern. Moving forward, we
diversity with the organisation. Halma has been relatively successful in achieving would like to see more information on how they benchmark themselves against
60% of women holding leadership positions within the organisation. They put this peers on ESG metrics. There was a high-level discussion on how ESG criteria are
down to a top-level focus on working closely with recruiters to produce balanced embedded into executive performance reviews (and therefore incentives), but
shortlists and an enhanced parental leave policy. greater detail on this would be welcome.
Outcome: seek further information regarding the benchmarking around ESG Outcome: seek further information regarding the benchmarking around ESG
performance as well as the development of ESG metrics. performance as well as the development of ESG metrics.
21QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
VOTING AND ENGAGEMENT
QUARTER ENDED 31 MARCH 2021
ROYAL DUTCH SHELL BLACKROCK THROGMORTON
Objective: discuss Net Zero ambitions. Objective: follow up to meeting held in May 2019 to discuss progress.
We joined a small investor roundtable with the Chair of the board to discuss a This was a general catch-up with the board. Topics discussed included board
number of topics including the company’s pathway to Net Zero emissions, this composition. The trust may enter the FTSE 250 soon, in which case they would
was updated in February. We raised concerns around the November departures be subject to disclosures related to the Parker Review on ethnic diversity. They
of multiple Directors in the renewables department. There was a suggestion that currently have 50% women representation on the board. We also discussed
some (but obviously not all) were to be influenced by the sentiment that Shell is improving disclosure of stewardship activities specific to the investment trust.
not moving fast enough in terms of reducing the company’s dependence on Oil
Outcome: All long positions are now disclosed (2019 engagement); monitor the
& Gas revenues. The Chair dismissed the idea that recent Director departures
development of the ESG and stewardship disclosure; monitor the level of NED
represented a material loss of expertise and pointed to the company’s ‘deep
shareholdings.
bench’ of talent as well their strong rotation and training programmes. The other
main topic discussed was the company’s commitment to provide an advisory
shareholder vote on the decarbonisation plan. The Chair outlined that they would B&M
like strong confirmation on what they see as an ambitious plan. It is not yet clear
to shareholders what would be the implications of strong dissent. Objective: remuneration policy consultation.
Outcome: this was a useful strategic conversation. Like with most 2050 Net We spoke to the Chair of the Remuneration Committee to discuss the proposed
Zero commitments, it is still relatively unclear how these goals will be achieved changes to the Director’s Remuneration Policy being presented at the 2021 AGM.
and at what point major company investment flows will transition away from Outcome: we have provided feedback on the proposed policy and will monitor
fossil fuels (renewables is still a very small part of the business). We will monitor the progress in regards ESG metrics.
developments moving forward.
22QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
VOTING AND ENGAGEMENT
QUARTER ENDED 31 MARCH 2021
RIO TINTO
Objective: meeting to discuss the implications of the 2020 Juukan Gorge incident.
As can be expected, given the prominence of the issue, we raised concerns related
to the handling of the 2020 Juukan Gorge incident. From the perspective of the
board, the event reflected inadequate risk management. All three executives
responsible for implementing the company’s risk framework are no longer
working for the company. The Chair detailed a series of measures, including
the retroactive review of all comparable cultural heritage sites. They have also
implemented a traditional owner advisory committee that feeds directly into
the board to help prevent this happening again. We discuss the appropriateness
of the 2020 compensation for the outgoing CEO. We were concerned that
appropriate discretion had not been applied to incentive payments given the
scale of the Juukan Gorge event. Based on our conversation, we were comforted
by the comprehensiveness of the review into the incident and the processes being
established to mitigate the risk of future controversies.
Outcome: we do not believe there was an appropriate adjustment to the outgoing
CEO’s 2020 remuneration and voted against the remuneration report at the 2021
AGM.
23QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Fixed Interest - United Kingdom
UK Government Securities
United Kingdom(Government Of) 4.5% Snr Bds 07/12/2042 GBP1000 'Regs' £160.18 1.72 2.82
United Kingdom(Government Of) 1.5% Snr Bds 22/07/2047 GBP1000 'Regs' £103.22 0.94 1.46
UK Index Linked Securities
United Kingdom(Government Of) 0.125% I/L Gilt Bds 22/11/2036 GBP1000 £166.21 0.98 0.08
Other UK Fixed Interest
A2D Funding II Plc 4.5% Gtd Snr Nts 30/09/2026 GBP100'Regs' £114.59 0.27 3.94
Motability Operations Group Plc 4.375% Gtd Snr EMTN 08/02/27 GBP100000'7 £118.55 0.29 3.69
Thames Water Utilities Finance Plc 6.75% A/Bkd Gtd Snr Sec 16/11/28 GBP'11' £134.99 0.22 5.00
British Telecommunications 5.75% Snr Bds 07/12/2028 GBP1000 'Regs' £127.26 0.27 4.52
Royal London Unit Trust Managers Sterling Credit Instl Inc Z GBP NAV £1.43 3.79 3.53
Sequoia Economic Infrast Inc Fd Ltd NPV £1.04 0.47 6.00
Fixed Interest - Overseas
AXA Investment Managers UK Ltd US Sht Duration High Yld Bd ZI Gross Dis £0.91 1.04 4.21
Pimco Global Advisors Irl Ltd Global Inv Grade Cred Hgd Instl Inc Nav £13.72 2.96 2.67
Equities - United Kingdom
Energy
Oil, Gas & Coal
Royal Dutch Shell 'B'ord EUR0.07 £13.47 0.97 3.48
Basic Materials
Precious Metals & Mining
Rio Tinto ord GBP0.10 £55.60 1.65 7.36
24QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Industrials
General Industrials
Smiths Group ord GBP0.375 £15.54 1.13 0.98
Smith(DS) ord GBP0.10 £4.13 0.98 2.32
Electronic & Electrical Equipment
Renishaw ord GBP0.10 £64.20 0.62 0.22
Halma ord GBP0.10 £23.82 0.44 0.71
Industrial Support Services
Experian ord USD0.10 £25.09 0.95 1.47
Consumer Staples
Beverages
Diageo Ord GBP0.28 101/108 £30.15 0.96 2.36
Personal Care, Drug & Grocery Stores
Ocado Group Plc ord GBP 0.02 £20.35 0.76 -
Tesco Ord £2.30 1.25 5.37
Unilever ord GBP0.031111 £40.94 1.32 3.65
Health Care
Pharmaceuticals & Biotechnology
Astrazeneca ord USD0.25 £72.56 0.94 2.86
Consumer Discretionary
Household Goods & Home Construction
Persimmon ord GBP0.10 £29.49 0.83 7.99
25QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Media
Relx Plc GBP0.1444 £18.21 1.06 2.58
Retailers
B & M European Value Retail SA ord GBP0.1 (DI) £5.35 1.14 10.36
Travel & Leisure
Compass Group Plc ord GBP0.1105 £14.66 0.89 -
Telecommunications
Telecommunications Service Providers
Vodafone Group ord USD0.2095238 £1.34 1.16 6.11
Utilities
Gas, Water & Multiutilities
National Grid ord GBP0.12431289 £8.60 0.94 5.67
United Utilities Group Ord £9.21 1.04 4.62
Financials
Investment Bank & Brokerage Services
Intermediate Capital Group Plc ord GBP0.2625 £18.62 0.99 2.87
London Stock Exchange Group ord GBP0.06918604 £69.39 0.70 1.08
M&G Plc Ord GBP0.05 £2.07 1.69 8.63
Closed End Investments
Blackrock Throgmorton Trust ord 5p £8.05 0.99 1.28
26QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Life Insurance
Prudential GBP0.05 £15.56 0.67 0.76
Legal & General Group ord GBP0.025 £2.83 1.48 6.30
Real Estate
Real Estate Investment Trusts
Segro Plc ord GBP0.10 £9.50 0.68 2.36
Equities - North America
Industrials
Industrial Engineering
Xylem Inc Com USD0.01 $104.88 0.74 1.06
Rockwell Automation Inc Com USD1 $267.64 0.67 1.61
Construction & Materials
Trane Technologies plc Com USD1 $166.95 0.77 1.43
Consumer Staples
Beverages
Coca-Cola Co Com USD0.25 $53.15 0.95 3.19
Health Care
Medical Equipment & Services
Thermo Fisher Scientific Ord $451.47 0.68 0.23
Medtronic Plc USD0.0001 $118.83 0.97 1.96
Stryker Corp Com Stk USD0.10 $243.10 0.72 1.03
Pharmaceuticals & Biotechnology
Merck & Co Inc Com USD0.50 $76.96 1.14 3.37
27QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Consumer Discretionary
Automobiles & Parts
Aptiv Plc Com USD0.01 $137.29 0.75 -
Tesla Inc Com USD0.10 $635.62 0.44 -
Leisure Goods
Electronic Arts Inc Com USD0.01 $134.43 0.68 0.50
Media
Netflix Inc Com USD0.001 $513.39 0.93 -
Retailers
Amazon Com Inc Com USD0.01 $3,055.29 1.44 0
Utilities
Electricity
Nextera Energy Inc Com USD0.01 $74.22 0.49 2.04
Financials
Banks
JPMorgan Chase & Co. Com USD1.00 $154.48 1.02 2.36
Investment Banking & Brokerage Services
Visa Inc Com Stk USD0.0001 'A' $211.90 0.96 0.60
Ares Management Corporation Com USD0.01 Class A $53.13 0.84 3.36
28QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Technology
Software & Computer Services
Microsoft Corp Com USD0.00000625 $231.85 1.56 0.95
Intuit Inc Com USD0.01 $373.66 1.24 0.62
Alphabet Inc Cap USD0.001 Cl C $2,055.54 1.26 -
Facebook Inc Com USD0.000006 Cl 'A' $288.00 1.10 -
Adobe Ord $465.46 0.96 -
Technology Hardware & Equipment
Advanced Micro Devices Inc Com Stk USD0.01 $76.00 0.37 -
Apple Inc Com USD0.00001 $119.90 1.37 0.67
Equities - Europe ex UK
Energy
Oil Gas & Coal
Total SE EUR2.5 € 39.65 1.07 6.64
Industrials
General Industrials
Siemens AG NPV(Regd) € 140.96 0.60 2.50
Consumer Staples
Food Producers
Nestle SA CHF0.10 (Regd) CHF 105.94 0.47 2.61
29QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Health Care
Pharmaceuticals & Biotechnology
Roche Holdings AG Genusscheine NPV CHF 306.13 0.44 2.98
Novartis AG CHF0.50 (Regd) CHF 80.93 0.75 3.71
Sanofi EUR2 € 84.16 0.50 3.80
Consumer Discretionary
Personal Goods
LVMH Moet Hennessy Vuitton SE EUR0.30 € 516.30 0.76 1.06
Adidas Ag (Regd) € 265.25 0.41 1.13
Telecommunications
Telecommunications Service Providers
Cellnex Telecom SA EUR0.25 € 49.20 0.50 0.21
Utilities
Electricity
Enel Spa EUR1 € 8.46 0.47 2.68
Financials
Banks
Ing Groep N.V. EUR0.01 € 10.45 0.83 5.46
Investment Banking & Brokerage Services
UBS Group AG CHF0.10 (Regd) CHF 12.47 0.48 2.39
Nonlife Insurance
Allianz Se (Regd)(Vinkuliert) € 217.65 0.77 4.42
Sampo Plc Ser'A'NPV € 38.60 0.50 4.42
30QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Technology
Technology Hardware & Equipment
ASML Holding NV EUR0.09 € 518.45 0.85 0.53
Equities - Japan
Financials
Unit Trusts
Baillie Gifford & Co Japanese Income Growth W4 Dis £1.56 3.46 2.20
Equities - Asia Pacific ex Japan
Consumer Discretionary
Leisure Goods
Samsung Electronics REG S GDR $1,809.50 0.81 1.05
Technology
Technology Hardware & Equipment
Taiwan Semiconductor Manufacturing Spon ADS Each Rep 5 Ord TWD10 $115.07 0.80 1.19
Financials
Unit Trusts
Matthews Asia Fds SICAV Asian ex Japan Div S GBP Dis £14.51 1.25 1.34
Veritas Funds Plc Veritas Asian D GBP Inc € 1,026.42 0.61 0.07
Equities - Emerging Markets
Consumer Discretionary
Retailers
Alibaba Group Holdings ltd Spon ADS Each Rep 8 Ord $229.25 0.49 -
31QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Financials
Unit Trusts
Wells Fargo (Lux) Worldwide Fund Emerging Markets Equity Income Y GBP Dis £98.36 1.24 3.15
Vontobel Asset Management Sa Mtx Sust Emg Markets Leaders Aqg GBP Dis £120.67 0.74 -
Technology
Software & Computer Services
Tencent Holdings Ltd HKD0.00002 $610.00 0.49 0.26
Equities - Global
Polar Capital Funds Plc Automation & Artificial Intel S GBP Cap £13.05 0.89 -
Alternative Investments
Infrastructure
Assura Ord £0.73 0.90 3.94
Foresight Solar Fund Ltd £1.02 1.43 6.77
BBGI SICAV S.A. ord NPV £1.71 0.93 4.25
HICL Infrastructure Plc ord GBP0.0001 £1.64 1.55 5.00
International Public Partner ord GBP0.0001 £1.67 1.61 4.49
Doric Nimrod Air Two Ltd ord Pref £0.76 0.12 23.68
The Renewables Infrastructure Grp Ord NPV £1.22 1.25 5.55
VH Global Sustainable Energy Opps Plc ord GBP0.01 £0.99 0.40 -
Property
Property Income Trust for Charities £0.82 0.94 5.69
JPM Global Core Real Assets £0.93 0.70 4.32
BMO Fund Management Ltd BMO Property Growth & Income I Inc £9.63 1.42 4.76
Aberdeen Standard EUR Logis Inc Plc Ord GBP0.01 £1.09 0.97 4.57
32QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
PORTFOLIO HOLDINGS contd.
AS AT 31 MARCH 2021
DESCRIPTION PRICE % OF TOTAL ESTIMATED YIELD %
Private Equity
Princess Private Equity Hldgs Ord EUR0.001 (EUR) £11.98 1.00 3.63
NB Private Equity Partners Limited Class'A'Ord Shs USD0.01 £11.75 0.99 3.80
Hipgnosis Songs Fund Ltd ord NPV £1.24 1.00 4.13
Cash - GBP £1.00 3.43 -
33QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
DISCLAIMER
The value of investments and the income from them can go down as well as up. You may not recover what you invest. There are risks involved with this
type of investment. Please refer to the Prospectus and Key Investor Information for further details visit: https://www.quiltercheviot.com/uk/charities/caif/.
Important Information: This document is for general information purposes only and does not take into account the specific investment objectives, financial
situation or individual requirements of any particular person. It is not a personal recommendation and it should not be regarded as a solicitation or an offer
to buy or sell any securities or instruments mentioned in it. Quilter Cheviot recommends that potential investors independently evaluate investments, and
encourages investors to seek the advice of a financial advisor. Unless otherwise stated, all statistics have been supplied by Quilter Cheviot. Whilst we believe
the facts to be correct, we cannot assume liability for any errors or omissions. Quilter Cheviot Limited is registered in England with number 01923571, registered
office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and
regulated by the UK Financial Conduct Authority.
CONTACT DETAILS
Quilter Cheviot
Senator House
85 Queen Victoria Street
London
EC4V 4AB
t: +44 (0)20 7150 4000
e: QCGIGFund@quiltercheviot.com
quiltercheviot.com
34 QCS239 (04/2021)QUILTER CHEVIOT GLOBAL INCOME AND GROWTH FUND FOR CHARITIES | QUARTERLY INVESTMENT REVIEW
quiltercheviot.com
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