The MSCI World equities index was up 4.6% in November (in GBP). Most sectors delivered a positive performance, with the strongest gains in Consumer Discretionary and Financials, while Materials and Healthcare lagged. The conclusion of the US election spurred a rally in US equities, while European and Chinese equities derated on fears of steeper tariffs from the Trump administration. The nomination of RFK Junior to the role of Health and Human Services Secretary weighed on parts of the Healthcare sector. US economic data received less scrutiny than usual, as employment and GDP trends were likely obscured by the effects of hurricanes Milton and Helene. Our expectation for a resilient path for the US economy remains unchanged, but we are mindful of the uncertainty which comes with a Republican sweep, including the potential for a trade war and higher inflation. With the US stock market at an all-time high, this calls for a measured approach to stock picking. We believe the Longevity portfolio offers a balanced defensive stance and remains well placed to benefit from long-term demographic trends.
Portfolio positioning and performance
The Pacific Longevity & Social Change strategy delivered a positive return but underperformed its global benchmark in November, with most of the underperformance attributable to our overweight allocation to Healthcare. Our Consumer Discretionary and Financials holdings delivered positive returns but lagged those of the benchmark. On a stock level, the top three absolute positive contributors to Fund performance in November were Booking, Strategic Education and Convatec. The primary detractors were Pets At Home, AbbVie and Exact Sciences.
Education and Wellbeing was the strongest contributor to performance led by Education and the Aesthetics & Vision subthemes. Strategic Education reported a strong Q3 and slightly raised the bottom end of the margin guidance while Adtalem continued to rerate post a good Q1 report at the end of October. The US election outcome was viewed positively for both. In Aesthetics & Vision, Ulta Beauty and EssilorLuxxotica made a positive contribution. Exact Sciences, part of the Screening subtheme, was the main detractor from performance. The company’s Q3 report disappointed on revenues and the company cut full year guidance noting that a weaker than usual seasonality, the effects of the hurricanes and a change to the billing system weighed on the quarter. While 2024 is unlikely to see a meaningful re-acceleration in sales, product launches and price increases planned for next year as well as the ongoing sales team efforts should restore the company’s growth algorithm.
Longevity Consumer also made a solid contribution to performance, with gains in Financial Planning and Travel & Leisure. Booking Holdings, part of the Travel & Leisure subtheme, and now our largest holding, continued to rerate after a solid Q3 report drove earnings upgrades. In Financial Planning, our holdings delivered a positive performance but lagged the broader Financials sector, due to our higher allocation to Europe. Amundi was one of the key detractors from performance on renewed French political turmoil and the news that UniCredit expressed an interest in acquiring Banco BPM which may affect the longterm distribution agreement between Amundi and UniCredit. Pets At Home, part of the Companionship subtheme, was the main detractor from Longevity Consumer. The company reported a disappointing H1, with strong trends in the Vets business overshadowed by a further deterioration in retail, despite easier year-on-year comparisons. Sluggish UK consumer demand and unfavourable pet registration trends leave us cautious, and we trimmed our position to reflect a lack of positive near-term catalysts.
Healthcare was the weakest contributor to fund performance in November as strength in Medical Devices was offset by weakness in Pharmacy and Drug Development & Manufacturing subthemes. Convatec and Boston Scientific, part of the Medical Devices subtheme, were the main contributors to performance. AbbVie and AstraZeneca, both part of the Pharmacy subtheme, were the main detractors. Convatec reported a strong Q3 and upgraded FY24 guidance. One of the flagship products in its wound care portfolio (InnovaMatrix) subsequently failed to maintain a Medicare reimbursement status. This has been on the cards for some time, acting as an overhang, and with the decision now finalised, expectations are rebased, and focus will shift to the rest of the company’s diversified product portfolio, which continues to perform strongly. AbbVie’s suffered a setback due to poor readouts from trials evaluating emraclidine as a treatment for schizophrenia. The drug was part of an acquisition made earlier in the year and expectations were high. AstraZeneca’s solid Q3 report and raised guidance was overshadowed by a Chinese regulator investigation into several of its current and former employees involving allegations of illegal importation of drugs and insurance fraud. While AstraZeneca is not being investigated directly, we continue to monitor the situation closely and attended a meeting with the company to assess the risk to AstraZeneca’s business in China.
Outlook
As we look ahead to the remainder of 2024 and into 2025, we remain focused on the reality that populations around the world are ageing. The social implications around this demographic transformation continue to create significant opportunities for companies that provide products and services which meet the changing consumption patterns driven by this phenomenon. Our Longevity and Social Change strategy is focused on identifying high-quality businesses which have such exposure and can deliver sustainable returns over the long term.
