Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

Consumer Staples allocations have fallen to their lowest levels in over a decade.  The Consumer Staples sector is now the 5th largest sector holding among active Global Emerging Market managers, well behind the heavyweights of Tech, Financials and their Discretionary peers. A 5-year decline in Consumer Staples exposure was compounded by negative fund activity over the course of 2021.  Consumer Staples stocks saw average weights decline by 0.41%, overweights decline by 0.16% and 5.4% of managers move to underweight, all aided by a net -$475m in fund outflows from the sector over the period. The most widely held stock in the 'Staples sector is <a href="https://www.smartkarma.com/entities/wal-mart-de-mexico-sab-de-cv" target="_blank" data-smartkarma-citation="entities:28373:1" rel="noopener">Wal-Mart de Mexico SAB de CV (WALMEX* MM EQUITY)</a>, held by 34.6% of the funds in our analysis at an average weight of 0.35%.  <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS),</a><a href="https://www.smartkarma.com/entities/kweichow-moutai-co-ltd-a" target="_blank" data-smartkarma-citation="entities:1553:1" rel="noopener">Kweichow Moutai (600519 CH)</a> and <a href="https://www.smartkarma.com/entities/fomento-de-construcciones-y-co" target="_blank" data-smartkarma-citation="entities:21269:1" rel="noopener">Fomento De Construcciones Y Co (FCC SM)</a> make up the 2nd tier.  With all 4 held overweight on average, these stocks are clearly well liked by the active EM investor base.The size and scale of the exodus over a relatively short time-period, the sustained period of underperformance and potentially a dampening of inflation risks could prompt managers to readdress their allocations.

Consumer Staples allocations have fallen to their lowest levels in over a decade.  The Consumer Staples sector is now the 5th largest sector holding among active Global Emerging Market managers, well behind the heavyweights of Tech, Financials and their Discretionary peers. A 5-year decline in Consumer Staples exposure was compounded by negative fund activity over the course of 2021.  Consumer Staples stocks saw average weights decline by 0.41%, overweights decline by 0.16% and 5.4% of managers move to underweight, all aided by a net -$475m in fund outflows from the sector over the period. The most widely held stock in the 'Staples sector is Wal-Mart de Mexico SAB de CV (WALMEX* MM EQUITY), held by 34.6% of the funds in our analysis at an average weight of 0.35%.  LG Household &amp; Health Care (051900 KS),Kweichow Moutai (600519 CH) and Fomento De Construcciones Y Co (FCC SM) make up the 2nd tier.  With all 4 held overweight on average, these stocks are clearly well liked by the active EM investor base.The size and scale of the exodus over a relatively short time-period, the sustained period of underperformance and potentially a dampening of inflation risks could prompt managers to readdress their allocations.

Consumer Staples:  EM Managers Positioned at All-Time Lows

Equity Bottom-Up

<ul>
<li>Ownership levels in Magnit are depressed. Today's average weights and funds held % are at multi-year lows.</li>
<li>Recent sentiment looks positive when compared to other EM stocks, though this is partly a function of low ownership rather then any large scale buying.</li>
<li>Although lightly owned at present, it is a well known stock having being owned by 151 of the 224 in our analysis.</li>
<li>Max ever combined AUM from the funds in our analysis is ~20x the current level, most funds are at their lowest ever levels of ownership.</li>
<li>Prices are highly correlated to EM fund ownership.  Higher ownership levels are likely to drive prices higher.</li>
<li>Given Magnit's strong performance in 2020 relative to broader EM and other favoured Russian stocks, it could be appearing back on the radar of active EM managers. If it does, expect performance to follow.</li>
</ul>


Ownership levels in Magnit are depressed. Today's average weights and funds held % are at multi-year lows.
Recent sentiment looks positive when compared to other EM stocks, though this is partly a function of low ownership rather then any large scale buying.
Although lightly owned at present, it is a well known stock having being owned by 151 of the 224 in our analysis.
Max ever combined AUM from the funds in our analysis is ~20x the current level, most funds are at their lowest ever levels of ownership.
Prices are highly correlated to EM fund ownership.  Higher ownership levels are likely to drive prices higher.
Given Magnit's strong performance in 2020 relative to broader EM and other favoured Russian stocks, it could be appearing back on the radar of active EM managers. If it does, expect performance to follow.


Mexico

Wal-Mart de Mexico S.A.B. de C.V. retails food, clothing, and other merchandise under a variety of store formats. The Company operates Wal-Mart Supercenters, Sam's Club wholesale outlets, Bodega discount stores and Superama supermarkets.

Fomento Economico Mexicano, S.A.B. de C.V. (FEMSA) is a Company that through its subsidiaries produces, distributes and markets non-alcoholic beverages throughout Latin America as part of the Coca-Cola system. The Company owns and operates convenience stores in Mexico and Colombia and holds a stake in Heineken.

Fomento Economico Mexica-Ubd (FEMSAUBD MM)

Grupo Bimbo SAB de CV produces and sells bakery products.  The Company produces breads, cookies, pies, pastries, sweet rolls, tortillas, tostadas, and snacks. The Company also makes appetizers, sweets, chocolates, jams, and other confections.  Grupo Bimbo markets its products throughout the Americas and Europe.

Kimberly-Clark de Mexico, S.A.B. de C.V. manufactures, markets and distributes consumer, industrial, and institutional hygiene products. The Company produces feminine care items, diapers, toilet paper and facial tissues.

Gruma, S.A.B. de C.V. is engaged primarily in the production, marketing, distribution, and sale of tortillas, corn flour, and wheat flour. The Company has operations in the United States, Mexico, Central America, Europe, Asia, and Oceania.

Coca-Cola FEMSA, S.A.B. de C.V. (Femsa) bottles beverages. The Company bottles and distributes branded beverages in parts of North, Central and South America. In some countries Femsa also markets water, beer, and other products.

Grupo Lala S.A.B. de C.V. is a Mexican healthful and nutritional foods company focusing on the production, innovation and marketing of milk and dairy products. The Company operates plants and distribution centers in Mexico and Central America.

Woolworths Limited operates supermarkets, specialty and discount department stores, liquor and electronics stores throughout Australia.  Woolworths also manufactures processed foods, exports and wholesales food and offers petrol retailing.  The Company also operates hotels which includes pubs, food, accommodation, and gaming operations.

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

CVS Health Corporation is an integrated pharmacy health care provider. The Company's offerings include pharmacy benefit management services; mail order, retail and specialty pharmacy; disease management programs; and retail clinics. The company operates drugstores throughout the U.S., the District of Columbia, and Puerto Rico.

Sysco Corporation distributes food and related products primarily to the foodservice industry.  The Company also distributes personal care guest amenities, housekeeping supplies, room accessories, and textiles to the lodging industry.

The Kroger Co. operates supermarkets and convenience stores in the United States.  The Company also manufactures and processes some of the foods that its supermarkets sell.

George Weston Limited operates as a super market. The Company processes and distributes food and pharmacy products to grocer wholesalers, warehouses, and independent accounts, as well as provides real estate services. George Weston serves customers in Canada.

Loblaw Companies Limited is a retail and wholesale food distributor with operations across Canada.  The Company's operations include both company and franchisee operated stores, warehouses, and cash and carry outlets.

Tesco PLC, through its subsidiaries, operates as a food retailer. The Company offers online retailing, brick and mortar supermarkets, and a private-label brand of products. Tesco provides its services primarily throughout Europe, with additional activities in Asia.

AEON CO., LTD. operates general merchandise stores, supermarkets, and convenience stores throughout Japan. The Company is also engaged in women's and casual clothing store business, development business of commercial property, and financing service through the subsidiaries.

Wal-Mart de Mexico SAB de CV (WALMEX* MM EQUITY)

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Wal-Mart de Mexico SAB de CV (WALMEX* MM EQUITY)

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