The Evenlode Global Equity fund returned 1.48% in October, moderately behind its comparator benchmark the MSCI World Index which returned 2.26% (GBP terms). The primary drivers of relative underperformance were our zero weight to Nvidia (which rose 14% and represents nearly 5% of the MSCI World Index) and our consumer staples exposure, which fell and is almost three times the index weight.

The MSCI World Consumer Staples Index lagged the broader index materially in the month.

Stepping back, it is hard to dispute that the cumulative increase in prices of the last three years has been very hard on consumers globally, even if the rate of inflation has moderated and wage growth remains solid. This inflation has been particularly powerful in non-discretionary services like rent, mortgage, insurance rates and utility bills, accentuated by idiosyncratic events like the resumption of US student loan payments in October 2023. On top of this, the Chinese economy has surprised the world with its rapid deterioration since the much-anticipated 2023 grand reopening. China fears have dragged down the beauty and spirits sub-categories, which are particularly well placed to grow globally over time with or without China. We think the malaise in consumer staples fundamentals is largely driven by these cyclical macro factors rather than by a sudden deterioration in the category’s competitive positioning and long-term growth opportunity. When a company is attractively positioned and valued, we are happy to build a position on fundamentals and not try to cherry-pick the very best holding period. We would rather board the bus early than risk missing the ride entirely.

We are now two-thirds of the way through Q3 reporting season. For portfolio companies reporting results in October, on a weighted average basis they grew revenue 9%, adjusted EBIT^[1] 19%, and GAAP EPS^[2] 15% compared to the same period in the previous year. This compares to the comparator MSCI World Index revenue and EPS weighted growth of 3.4% and 3.1% (source: Bloomberg). We were particularly pleased to see solid results from all of our largest holdings which demonstrated continued solid execution and further improvement in the quality and scope of their offerings to their clients. Over time, we expect the historic relationship between fundamentals and share prices to hold, giving us much cause for optimism as we look ahead to 2025 and beyond. We remain profoundly grateful for your continued support.

^[1] Earnings before interest and taxation

^[2] Earnings per share