WEBVTT 00:00:00.000 --> 00:00:05.280 align:middle line:90% 00:00:05.280 --> 00:00:07.050 align:middle line:90% So thank you, Tristan and James. 00:00:07.050 --> 00:00:11.700 align:middle line:84% I'm Helgi Skibeli, portfolio manager of JGGI. 00:00:11.700 --> 00:00:16.350 align:middle line:84% I've been with JP Morgan for about 30 years, and the last 25 00:00:16.350 --> 00:00:20.350 align:middle line:84% years managing portfolios within this same process. 00:00:20.350 --> 00:00:25.320 align:middle line:84% So James, Tim, and I will give a presentation of JGGI. 00:00:25.320 --> 00:00:29.190 align:middle line:84% I will start by giving you an overview of our approach 00:00:29.190 --> 00:00:32.640 align:middle line:84% to managing the strategy, and then James 00:00:32.640 --> 00:00:36.540 align:middle line:84% will discuss our outlook and current portfolio positioning. 00:00:36.540 --> 00:00:39.090 align:middle line:84% Finally, Tim will discuss our approach 00:00:39.090 --> 00:00:42.180 align:middle line:84% to ESG and the investment performance 00:00:42.180 --> 00:00:44.260 align:middle line:90% that we have achieved. 00:00:44.260 --> 00:00:47.010 align:middle line:84% And then we would be delighted to answer any questions 00:00:47.010 --> 00:00:48.840 align:middle line:90% that you may have. 00:00:48.840 --> 00:00:52.055 align:middle line:84% So with that, let's go to the first slide, James. 00:00:52.055 --> 00:00:55.790 align:middle line:90% 00:00:55.790 --> 00:00:57.530 align:middle line:90% So what is JGGI? 00:00:57.530 --> 00:01:01.370 align:middle line:90% It is our top 50 global ideas. 00:01:01.370 --> 00:01:03.410 align:middle line:90% It's all about stock selection. 00:01:03.410 --> 00:01:06.770 align:middle line:84% It's an unconstrained, "go anywhere" strategy. 00:01:06.770 --> 00:01:10.050 align:middle line:84% We have the luxury of going anywhere in the world, 00:01:10.050 --> 00:01:14.060 align:middle line:84% any region, any sector, to pick the very best ideas 00:01:14.060 --> 00:01:15.200 align:middle line:90% that we may have. 00:01:15.200 --> 00:01:18.920 align:middle line:84% We are supported by this amazing global research 00:01:18.920 --> 00:01:20.660 align:middle line:90% team at JP Morgan. 00:01:20.660 --> 00:01:24.170 align:middle line:84% We have between 80 and 100 senior investment professionals 00:01:24.170 --> 00:01:28.880 align:middle line:84% in this team, and they cover 2,500 stocks. 00:01:28.880 --> 00:01:30.110 align:middle line:90% So think about that. 00:01:30.110 --> 00:01:35.210 align:middle line:84% 2,500 stocks is an enormous opportunity set for us, 00:01:35.210 --> 00:01:39.050 align:middle line:84% and it's more than 90% of the world's market cap. 00:01:39.050 --> 00:01:41.630 align:middle line:84% So that's a huge advantage right there. 00:01:41.630 --> 00:01:46.970 align:middle line:84% JGGI is also offering a really attractive combination, 00:01:46.970 --> 00:01:51.080 align:middle line:84% I would say, of long-term capital appreciation 00:01:51.080 --> 00:01:53.840 align:middle line:90% growth and 4% dividend yield. 00:01:53.840 --> 00:01:56.610 align:middle line:84% This is a really unique combination, which 00:01:56.610 --> 00:01:58.800 align:middle line:90% is unusual in this industry. 00:01:58.800 --> 00:02:02.280 align:middle line:84% And you can also see that since this team was 00:02:02.280 --> 00:02:05.640 align:middle line:84% put in place about 4 and 1/2 years ago managing 00:02:05.640 --> 00:02:11.009 align:middle line:84% the strategy, we have achieved 4.3% annualized performance, 00:02:11.009 --> 00:02:15.840 align:middle line:90% compared to the MSCI ACWI index. 00:02:15.840 --> 00:02:20.390 align:middle line:84% So you can go to the next slide, James. 00:02:20.390 --> 00:02:23.180 align:middle line:84% So another way of looking at that performance 00:02:23.180 --> 00:02:29.960 align:middle line:84% is, if you invested in this strategy in April 2019, 00:02:29.960 --> 00:02:32.690 align:middle line:84% when we started managing this strategy, 00:02:32.690 --> 00:02:38.690 align:middle line:84% you would have achieved a total return of 75% from that date 00:02:38.690 --> 00:02:40.620 align:middle line:90% on until today. 00:02:40.620 --> 00:02:44.480 align:middle line:84% And if you invested in the index instead, in an index fund, 00:02:44.480 --> 00:02:47.160 align:middle line:90% you would have achieved 45%. 00:02:47.160 --> 00:02:51.650 align:middle line:84% So the difference of 30% is what you 00:02:51.650 --> 00:02:55.910 align:middle line:84% are left with by believing in us and trusting in us, 00:02:55.910 --> 00:02:58.340 align:middle line:84% and that is our job also going forward, 00:02:58.340 --> 00:03:02.340 align:middle line:84% to make sure that we achieve great investment results. 00:03:02.340 --> 00:03:04.445 align:middle line:84% So now you can go to the next slide, James. 00:03:04.445 --> 00:03:08.540 align:middle line:90% 00:03:08.540 --> 00:03:09.590 align:middle line:90% One more slide. 00:03:09.590 --> 00:03:10.380 align:middle line:90% There we are. 00:03:10.380 --> 00:03:12.450 align:middle line:90% So how do we achieve this? 00:03:12.450 --> 00:03:14.910 align:middle line:84% How do we achieve such great performance? 00:03:14.910 --> 00:03:24.030 align:middle line:84% So we typically invest in stocks with three key characteristics. 00:03:24.030 --> 00:03:26.560 align:middle line:84% The first one is superior quality of earnings. 00:03:26.560 --> 00:03:28.260 align:middle line:90% So what do we mean by that? 00:03:28.260 --> 00:03:32.720 align:middle line:84% So our global research team has a really rigorous approach 00:03:32.720 --> 00:03:36.230 align:middle line:84% to think about what kind of economics or profitability 00:03:36.230 --> 00:03:37.880 align:middle line:90% does the business have today. 00:03:37.880 --> 00:03:39.590 align:middle line:90% How sustainable is that? 00:03:39.590 --> 00:03:43.910 align:middle line:84% What kind of cash flows can we expect over the next 7 to 10 00:03:43.910 --> 00:03:48.590 align:middle line:84% years, maybe, meaning, is there really duration to these cash 00:03:48.590 --> 00:03:50.820 align:middle line:84% flows and earnings that you see today? 00:03:50.820 --> 00:03:53.870 align:middle line:84% And the third point is governance. 00:03:53.870 --> 00:03:56.810 align:middle line:84% Is there management, is there a board in place, 00:03:56.810 --> 00:04:01.280 align:middle line:84% that will make sure that we as shareholders will benefit 00:04:01.280 --> 00:04:03.980 align:middle line:84% from cash flows in the future so we'll be receiving 00:04:03.980 --> 00:04:08.010 align:middle line:84% the dividends and the buybacks that we think 00:04:08.010 --> 00:04:10.350 align:middle line:90% should take place? 00:04:10.350 --> 00:04:12.690 align:middle line:84% So economic summation and governance 00:04:12.690 --> 00:04:15.240 align:middle line:84% will determine how great the business is, 00:04:15.240 --> 00:04:17.700 align:middle line:84% and we, or our research department, 00:04:17.700 --> 00:04:21.870 align:middle line:84% is dividing the universe into premium quality companies, 00:04:21.870 --> 00:04:24.310 align:middle line:84% these are the best quality companies in the world, 00:04:24.310 --> 00:04:25.600 align:middle line:90% and everybody else. 00:04:25.600 --> 00:04:27.810 align:middle line:84% So what you can see here on the left side 00:04:27.810 --> 00:04:30.840 align:middle line:84% is that 80% of the portfolio right 00:04:30.840 --> 00:04:34.710 align:middle line:84% now resides in the top quality companies of this world. 00:04:34.710 --> 00:04:38.100 align:middle line:84% And this 80% is very representative of the ratio 00:04:38.100 --> 00:04:40.600 align:middle line:90% over time. 00:04:40.600 --> 00:04:42.660 align:middle line:84% Secondly, you can see in the middle 00:04:42.660 --> 00:04:47.830 align:middle line:84% that we own companies that are growing faster than the market. 00:04:47.830 --> 00:04:50.670 align:middle line:84% So right now, our average holding 00:04:50.670 --> 00:04:54.000 align:middle line:84% has a 3% growth advantage, on average, 00:04:54.000 --> 00:04:55.600 align:middle line:90% compared to the market. 00:04:55.600 --> 00:04:59.160 align:middle line:90% So we make five-year forecasts. 00:04:59.160 --> 00:05:01.500 align:middle line:84% Every analyst has a framework where 00:05:01.500 --> 00:05:04.470 align:middle line:84% we come up with long-term earnings and cash flow 00:05:04.470 --> 00:05:06.480 align:middle line:90% forecasts. 00:05:06.480 --> 00:05:09.690 align:middle line:84% So these companies that we own in that framework 00:05:09.690 --> 00:05:14.140 align:middle line:84% has an annual 3% growth advantage to everybody else 00:05:14.140 --> 00:05:14.640 align:middle line:90% out there. 00:05:14.640 --> 00:05:18.550 align:middle line:90% 00:05:18.550 --> 00:05:24.750 align:middle line:84% Then we do that, amazingly, at the valuation level, which 00:05:24.750 --> 00:05:26.220 align:middle line:90% is very similar to the markets. 00:05:26.220 --> 00:05:30.330 align:middle line:84% Right now, we have a free cash flow yield portfolio 00:05:30.330 --> 00:05:32.470 align:middle line:90% that's the same as the market. 00:05:32.470 --> 00:05:35.280 align:middle line:84% So we invest in companies that are 00:05:35.280 --> 00:05:38.910 align:middle line:84% long-term winners with premium quality franchises that 00:05:38.910 --> 00:05:42.990 align:middle line:84% can grow faster than the market, but at the same valuation 00:05:42.990 --> 00:05:44.020 align:middle line:90% as the market. 00:05:44.020 --> 00:05:46.830 align:middle line:84% That's an amazing combination that leads 00:05:46.830 --> 00:05:48.580 align:middle line:90% to our performance over time. 00:05:48.580 --> 00:05:50.415 align:middle line:84% Now you can go to the next slide, James. 00:05:50.415 --> 00:05:56.480 align:middle line:90% 00:05:56.480 --> 00:05:59.530 align:middle line:84% Some people sometimes say to us, well, you 00:05:59.530 --> 00:06:03.290 align:middle line:84% can't do that if you're not a growth manager. 00:06:03.290 --> 00:06:05.645 align:middle line:84% We are not a growth manager, and we really 00:06:05.645 --> 00:06:08.250 align:middle line:84% would like to stress that point for you today. 00:06:08.250 --> 00:06:12.410 align:middle line:84% So on the left side here is what you see a styled map, 00:06:12.410 --> 00:06:18.170 align:middle line:84% and the blue cloud are quarterly observations of JGGI. 00:06:18.170 --> 00:06:21.780 align:middle line:84% And the red dot that you can see is the index itself. 00:06:21.780 --> 00:06:25.850 align:middle line:84% So the blue dots are really close to the red dots, 00:06:25.850 --> 00:06:28.220 align:middle line:84% meaning that the overall risk characteristics 00:06:28.220 --> 00:06:31.820 align:middle line:84% of this portfolio is always really close to the index. 00:06:31.820 --> 00:06:33.680 align:middle line:90% It's never growth portfolio. 00:06:33.680 --> 00:06:35.250 align:middle line:84% It's never value portfolio either, 00:06:35.250 --> 00:06:38.180 align:middle line:84% for that matter, or mid cap or small cap. 00:06:38.180 --> 00:06:40.890 align:middle line:90% it's always large cap core. 00:06:40.890 --> 00:06:43.910 align:middle line:84% And you can see on the right side 00:06:43.910 --> 00:06:46.310 align:middle line:84% that, over the last 4 and 1/2 years, 00:06:46.310 --> 00:06:49.340 align:middle line:84% we have gone through three style regimes. 00:06:49.340 --> 00:06:54.920 align:middle line:84% First, a very strong growth market that ended in late '21. 00:06:54.920 --> 00:07:01.310 align:middle line:84% Then there was a relatively strong value market in '22. 00:07:01.310 --> 00:07:04.710 align:middle line:84% And this last year has been the most extreme growth environment 00:07:04.710 --> 00:07:05.610 align:middle line:90% ever. 00:07:05.610 --> 00:07:07.920 align:middle line:84% I'm sure all of you have heard about Magnificent 00:07:07.920 --> 00:07:11.760 align:middle line:84% Seven, the highest concentration of growth markets 00:07:11.760 --> 00:07:13.680 align:middle line:90% ever in history, et cetera. 00:07:13.680 --> 00:07:16.950 align:middle line:84% But importantly, we have outperformed 00:07:16.950 --> 00:07:18.630 align:middle line:90% in each one of those three. 00:07:18.630 --> 00:07:22.860 align:middle line:84% So this is truly a style-agnostic, all weather 00:07:22.860 --> 00:07:23.566 align:middle line:90% portfolio. 00:07:23.566 --> 00:07:26.310 align:middle line:84% We don't need value, or growth, or anything. 00:07:26.310 --> 00:07:29.520 align:middle line:84% We can just perform great in any environment. 00:07:29.520 --> 00:07:33.000 align:middle line:84% That is one big advantage of this strategy. 00:07:33.000 --> 00:07:37.190 align:middle line:84% Now you can go to the next slide, James. 00:07:37.190 --> 00:07:38.510 align:middle line:90% So how do we pick stocks? 00:07:38.510 --> 00:07:41.120 align:middle line:84% What is it that we look at that's so special? 00:07:41.120 --> 00:07:45.590 align:middle line:84% So we typically have three criteria that we really 00:07:45.590 --> 00:07:48.560 align:middle line:90% emphasize in this portfolio. 00:07:48.560 --> 00:07:51.380 align:middle line:84% This is a very consistent process 00:07:51.380 --> 00:07:54.630 align:middle line:84% that we have been sticking to for a very long time, 00:07:54.630 --> 00:07:57.240 align:middle line:84% and there are three criteria that we use. 00:07:57.240 --> 00:07:59.040 align:middle line:90% The first one is valuation. 00:07:59.040 --> 00:08:01.040 align:middle line:90% The second one is insight. 00:08:01.040 --> 00:08:04.610 align:middle line:84% And the third one is conviction, or confidence. 00:08:04.610 --> 00:08:07.500 align:middle line:84% So valuation I talked a bit about already. 00:08:07.500 --> 00:08:11.660 align:middle line:84% We want to buy stocks that are highly rated, 00:08:11.660 --> 00:08:15.530 align:middle line:84% stocks that, on a relative basis within their global sector, 00:08:15.530 --> 00:08:18.530 align:middle line:84% appear as really undervalued compared to everybody else's 00:08:18.530 --> 00:08:19.350 align:middle line:90% sector. 00:08:19.350 --> 00:08:22.220 align:middle line:84% So there is a real consistent valuation discipline 00:08:22.220 --> 00:08:25.020 align:middle line:90% within this strategy. 00:08:25.020 --> 00:08:29.630 align:middle line:84% The second one, insight, means that we work very closely 00:08:29.630 --> 00:08:30.380 align:middle line:90% with the analysts. 00:08:30.380 --> 00:08:33.710 align:middle line:84% We always work really closely with this amazing research team 00:08:33.710 --> 00:08:36.590 align:middle line:84% to really understand the kind of research they have done. 00:08:36.590 --> 00:08:38.640 align:middle line:90% How did they collect data? 00:08:38.640 --> 00:08:40.200 align:middle line:90% What data did they collect? 00:08:40.200 --> 00:08:41.669 align:middle line:90% How did that process that data? 00:08:41.669 --> 00:08:44.420 align:middle line:84% What kind of conclusions did they get to, and why? 00:08:44.420 --> 00:08:48.060 align:middle line:84% Why do they have a real unique differentiated insight 00:08:48.060 --> 00:08:49.410 align:middle line:90% versus the market? 00:08:49.410 --> 00:08:51.600 align:middle line:84% The more differentiated and unique that 00:08:51.600 --> 00:08:54.680 align:middle line:84% insight is, the more we like the idea. 00:08:54.680 --> 00:08:57.920 align:middle line:84% And confidence, the last born, or conviction, 00:08:57.920 --> 00:09:01.250 align:middle line:84% is basically related to what I talked about when it comes 00:09:01.250 --> 00:09:03.650 align:middle line:90% to premium quality franchises. 00:09:03.650 --> 00:09:07.970 align:middle line:84% We want to own stocks where we have high conviction 00:09:07.970 --> 00:09:11.310 align:middle line:84% in the trajectory of earnings and cash flows the next three 00:09:11.310 --> 00:09:12.480 align:middle line:90% to five years. 00:09:12.480 --> 00:09:15.740 align:middle line:84% So the range of outcomes five years out is really narrow. 00:09:15.740 --> 00:09:17.640 align:middle line:90% That's what we like to do. 00:09:17.640 --> 00:09:21.650 align:middle line:84% So the more we can find that the valuation signals 00:09:21.650 --> 00:09:25.970 align:middle line:84% unique insights and a real premium quality company 00:09:25.970 --> 00:09:28.250 align:middle line:84% that we believe in the next five years, 00:09:28.250 --> 00:09:31.340 align:middle line:84% the more we believe in each of those three factors 00:09:31.340 --> 00:09:34.250 align:middle line:84% at the same time, the more we like that stock, 00:09:34.250 --> 00:09:36.860 align:middle line:84% and the more we're going to own that stock portfolio. 00:09:36.860 --> 00:09:40.470 align:middle line:84% Not all our active sizes are the same. 00:09:40.470 --> 00:09:42.210 align:middle line:84% Some are much bigger than others, 00:09:42.210 --> 00:09:45.290 align:middle line:84% and those are top holdings, and they 00:09:45.290 --> 00:09:48.860 align:middle line:84% have lots of valuation insight and confidence, 00:09:48.860 --> 00:09:51.480 align:middle line:84% or conviction, all at the same time. 00:09:51.480 --> 00:09:56.150 align:middle line:84% So now you can go to the next slide, James. 00:09:56.150 --> 00:09:57.460 align:middle line:90% There's our team. 00:09:57.460 --> 00:10:01.240 align:middle line:84% Three of us you can see together with the rest 00:10:01.240 --> 00:10:05.260 align:middle line:84% of the PM's and the global core team here at JP Morgan. 00:10:05.260 --> 00:10:08.260 align:middle line:84% We are nine investors in this team, 00:10:08.260 --> 00:10:11.410 align:middle line:84% and a really nice balance between really 00:10:11.410 --> 00:10:14.110 align:middle line:84% seasoned, experienced portfolio managers 00:10:14.110 --> 00:10:16.210 align:middle line:90% and up-and-coming talent. 00:10:16.210 --> 00:10:21.040 align:middle line:84% In addition to JGGI, we also manage two other strategies 00:10:21.040 --> 00:10:22.510 align:middle line:90% in this team. 00:10:22.510 --> 00:10:26.500 align:middle line:84% And what has become more and more apparent 00:10:26.500 --> 00:10:30.460 align:middle line:84% in recent years is that we have really sophisticated, 00:10:30.460 --> 00:10:35.950 align:middle line:84% advanced analytical tools at our disposal at JP Morgan, such 00:10:35.950 --> 00:10:38.920 align:middle line:84% that we can use our data to really manage 00:10:38.920 --> 00:10:41.740 align:middle line:84% risk to construct portfolios to really hone in 00:10:41.740 --> 00:10:44.480 align:middle line:84% on these advantages that I've talked about already. 00:10:44.480 --> 00:10:47.440 align:middle line:84% We want to have as much stock-specific risk 00:10:47.440 --> 00:10:51.730 align:middle line:84% as we possibly can in the portfolio and much less country 00:10:51.730 --> 00:10:55.420 align:middle line:84% risk, factor risk, macro risk, these things that we 00:10:55.420 --> 00:10:57.290 align:middle line:84% can't control, these things where 00:10:57.290 --> 00:10:58.820 align:middle line:90% we don't have an advantage. 00:10:58.820 --> 00:11:02.360 align:middle line:84% We have a huge advantage understanding 00:11:02.360 --> 00:11:05.810 align:middle line:84% industries and companies better than the competition. 00:11:05.810 --> 00:11:08.060 align:middle line:84% With really advanced portfolio analytics, 00:11:08.060 --> 00:11:12.380 align:middle line:84% we can really hone in on those and maximize that portion 00:11:12.380 --> 00:11:14.360 align:middle line:90% of risk in our portfolio. 00:11:14.360 --> 00:11:16.340 align:middle line:84% Now you can go to the next slide, James. 00:11:16.340 --> 00:11:19.740 align:middle line:90% 00:11:19.740 --> 00:11:22.530 align:middle line:84% And here's the great research team. 00:11:22.530 --> 00:11:24.870 align:middle line:84% Been around for a long time, this team. 00:11:24.870 --> 00:11:25.780 align:middle line:90% 40 years. 00:11:25.780 --> 00:11:30.210 align:middle line:84% We started off this process and this team in the 1980s. 00:11:30.210 --> 00:11:33.600 align:middle line:84% Really consistent execution of that 00:11:33.600 --> 00:11:37.040 align:middle line:90% process over these 40 years. 00:11:37.040 --> 00:11:40.050 align:middle line:84% Amazing team based in New York, based in London, 00:11:40.050 --> 00:11:43.170 align:middle line:84% based in several Asian cities, all over the world, 00:11:43.170 --> 00:11:45.240 align:middle line:90% with 40 different nationalities. 00:11:45.240 --> 00:11:47.490 align:middle line:90% A huge amount of diversity. 00:11:47.490 --> 00:11:51.390 align:middle line:84% Diversity leads to lots of different opinions, views, 00:11:51.390 --> 00:11:52.350 align:middle line:90% insights. 00:11:52.350 --> 00:11:54.520 align:middle line:90% It's just an amazing thing. 00:11:54.520 --> 00:11:59.460 align:middle line:84% So again, back to our global data advantage. 00:11:59.460 --> 00:12:03.770 align:middle line:84% So we have collected and saved our earnings and cash flow 00:12:03.770 --> 00:12:09.290 align:middle line:84% forecasts every day in this team for 40 years for 2,500 stocks. 00:12:09.290 --> 00:12:13.040 align:middle line:84% You can imagine what an incredible database 00:12:13.040 --> 00:12:15.290 align:middle line:90% that we have at our disposal. 00:12:15.290 --> 00:12:17.270 align:middle line:84% And with really advanced data analytics 00:12:17.270 --> 00:12:21.110 align:middle line:84% that we have today in the team, and AI is also 00:12:21.110 --> 00:12:24.470 align:middle line:84% coming very strong within this process and JPMorgan, 00:12:24.470 --> 00:12:27.780 align:middle line:84% our advantage is just getting better all the time. 00:12:27.780 --> 00:12:31.520 align:middle line:84% So with that, I will hand it over to you, James. 00:12:31.520 --> 00:12:32.600 align:middle line:90% Thank you, Helgi. 00:12:32.600 --> 00:12:35.720 align:middle line:90% Can you hear me? 00:12:35.720 --> 00:12:36.220 align:middle line:90% Yeah? 00:12:36.220 --> 00:12:37.240 align:middle line:90% OK. 00:12:37.240 --> 00:12:41.530 align:middle line:84% So I'll take you through the positioning of the strategy. 00:12:41.530 --> 00:12:46.510 align:middle line:84% And here, you can see how the portfolio is positioned 00:12:46.510 --> 00:12:48.620 align:middle line:90% across the core universe. 00:12:48.620 --> 00:12:51.970 align:middle line:84% So you have your high-growth cohorts at the top, 00:12:51.970 --> 00:12:54.820 align:middle line:84% you have your defensives on the left, 00:12:54.820 --> 00:12:58.250 align:middle line:84% and you have your cyclicals on the right-hand side. 00:12:58.250 --> 00:13:00.820 align:middle line:84% And I just want to make three key points. 00:13:00.820 --> 00:13:03.620 align:middle line:84% And this is a very top-level perspective. 00:13:03.620 --> 00:13:06.280 align:middle line:84% But first of all is that we are overweight, 00:13:06.280 --> 00:13:07.510 align:middle line:90% the high-growth cohort. 00:13:07.510 --> 00:13:10.510 align:middle line:90% About 9% overweight high-growth. 00:13:10.510 --> 00:13:15.400 align:middle line:84% And within that, we're more overweight to the high-growth 00:13:15.400 --> 00:13:16.180 align:middle line:90% cyclicals. 00:13:16.180 --> 00:13:21.820 align:middle line:84% In particular, the Silicon Stars or the semiconductor cycle. 00:13:21.820 --> 00:13:25.900 align:middle line:84% Second to that is that we are overweight the defensive part 00:13:25.900 --> 00:13:26.750 align:middle line:90% of the market. 00:13:26.750 --> 00:13:29.950 align:middle line:84% So you can see towards that left-hand side 00:13:29.950 --> 00:13:33.100 align:middle line:84% that we have about an 8% overweight to defensives. 00:13:33.100 --> 00:13:37.550 align:middle line:84% We've been increasing that position through time. 00:13:37.550 --> 00:13:39.740 align:middle line:84% Basically, based on where valuations 00:13:39.740 --> 00:13:41.900 align:middle line:84% have gone over the course of this year, 00:13:41.900 --> 00:13:44.810 align:middle line:84% they've become increasingly attractive. 00:13:44.810 --> 00:13:47.870 align:middle line:84% And therefore, we have been slowly adding to that. 00:13:47.870 --> 00:13:52.910 align:middle line:84% In particular, we've been adding to the high-quality parts 00:13:52.910 --> 00:13:53.660 align:middle line:90% of defensive. 00:13:53.660 --> 00:13:57.770 align:middle line:84% So here's what we call the Steady Stalwarts. 00:13:57.770 --> 00:14:01.400 align:middle line:84% That's made up of your exchanges, your non-life 00:14:01.400 --> 00:14:02.790 align:middle line:90% insurance companies. 00:14:02.790 --> 00:14:05.510 align:middle line:84% So if you take Chicago Metal Exchange, 00:14:05.510 --> 00:14:10.850 align:middle line:84% for example, CME, US listed, it's an asset-light exchange. 00:14:10.850 --> 00:14:14.510 align:middle line:84% Nice operational leverage, good growth profile, 00:14:14.510 --> 00:14:16.760 align:middle line:90% trading at attractive prices. 00:14:16.760 --> 00:14:21.450 align:middle line:84% It's been a real performer over the last quarter as well. 00:14:21.450 --> 00:14:24.890 align:middle line:84% And then finally, to flag that we're also 00:14:24.890 --> 00:14:28.760 align:middle line:84% significantly underweight to the low-growth cyclical part 00:14:28.760 --> 00:14:30.270 align:middle line:90% of the market. 00:14:30.270 --> 00:14:33.180 align:middle line:84% And while valuations range from anywhere 00:14:33.180 --> 00:14:36.140 align:middle line:84% that's reasonable to overvalued when you look 00:14:36.140 --> 00:14:39.380 align:middle line:84% at the industrial cyclical part of the market, 00:14:39.380 --> 00:14:44.660 align:middle line:84% really, our main concern here is where we think earnings can go. 00:14:44.660 --> 00:14:47.270 align:middle line:84% We believe that this part of the market, the margins 00:14:47.270 --> 00:14:51.140 align:middle line:84% are significantly above normal, and we 00:14:51.140 --> 00:14:54.260 align:middle line:84% think that there's a reasonable risk of downside 00:14:54.260 --> 00:14:55.620 align:middle line:90% to these numbers. 00:14:55.620 --> 00:14:59.060 align:middle line:84% So in particular, if you think about your consumer cyclicals, 00:14:59.060 --> 00:15:02.720 align:middle line:84% they've been a real COVID winner, all those stimulus 00:15:02.720 --> 00:15:05.330 align:middle line:84% checks that have been coming through 00:15:05.330 --> 00:15:08.240 align:middle line:84% and how that's been pushed into the consumer cycle, 00:15:08.240 --> 00:15:12.140 align:middle line:84% in particular, the consumer electronics part of the market. 00:15:12.140 --> 00:15:16.020 align:middle line:84% But going forward, we think that those earnings are at risk. 00:15:16.020 --> 00:15:19.340 align:middle line:84% So you're seeing those consumer savings coming down, 00:15:19.340 --> 00:15:23.330 align:middle line:84% particularly within the low-income demographics. 00:15:23.330 --> 00:15:26.450 align:middle line:84% You're seeing consumer credit tightening. 00:15:26.450 --> 00:15:28.430 align:middle line:84% And finally, you're seeing the oil price 00:15:28.430 --> 00:15:32.420 align:middle line:84% being 15% higher than where it was six months ago. 00:15:32.420 --> 00:15:37.010 align:middle line:84% That's going to really begin to bite the underlying consumer. 00:15:37.010 --> 00:15:40.490 align:middle line:84% So for that reason, we have a significant underweight 00:15:40.490 --> 00:15:41.910 align:middle line:90% to this part of the market. 00:15:41.910 --> 00:15:46.410 align:middle line:84% But again, we want to give you that balanced core portfolio. 00:15:46.410 --> 00:15:50.240 align:middle line:84% So within the core space, within the cyclical space, 00:15:50.240 --> 00:15:52.220 align:middle line:90% we do like the Silicon Stars. 00:15:52.220 --> 00:15:54.810 align:middle line:90% That's your semiconductor cycle. 00:15:54.810 --> 00:15:58.190 align:middle line:84% This is a part of the market that has been over-investing 00:15:58.190 --> 00:15:59.720 align:middle line:90% for several years. 00:15:59.720 --> 00:16:03.140 align:middle line:84% We think that capital intensity will come down, 00:16:03.140 --> 00:16:06.890 align:middle line:84% and with that, your free cash flow will return, 00:16:06.890 --> 00:16:08.390 align:middle line:90% margins will improve. 00:16:08.390 --> 00:16:13.110 align:middle line:84% And long-term, we think that AI means a better growth profile. 00:16:13.110 --> 00:16:16.520 align:middle line:84% Whether you're thinking about GPUs, CPUs, or memory, 00:16:16.520 --> 00:16:19.280 align:middle line:84% we think the volume of chips is likely to increase. 00:16:19.280 --> 00:16:21.350 align:middle line:84% And overall, this is typically where you 00:16:21.350 --> 00:16:25.200 align:middle line:90% find higher-quality businesses. 00:16:25.200 --> 00:16:30.320 align:middle line:84% So with that said, if we can flip over the page. 00:16:30.320 --> 00:16:33.530 align:middle line:84% Here, you can see our top 10 holdings. 00:16:33.530 --> 00:16:37.340 align:middle line:84% And again, I'm just going to make three key points on this. 00:16:37.340 --> 00:16:40.430 align:middle line:84% First is that this is a high-conviction, highly 00:16:40.430 --> 00:16:42.270 align:middle line:90% concentrated strategy. 00:16:42.270 --> 00:16:45.950 align:middle line:84% So these top 10 holdings make up over 1/3 00:16:45.950 --> 00:16:48.690 align:middle line:90% of the entire portfolio. 00:16:48.690 --> 00:16:51.410 align:middle line:84% Second is that we're playing into a broad number 00:16:51.410 --> 00:16:54.890 align:middle line:84% of attractive growth structural trends. 00:16:54.890 --> 00:16:56.930 align:middle line:84% So whether you're looking at Amazon, 00:16:56.930 --> 00:17:01.580 align:middle line:84% a company that has invested over $160 billion 00:17:01.580 --> 00:17:06.020 align:middle line:84% over the past three years, which compares to $30 billion 00:17:06.020 --> 00:17:10.099 align:middle line:84% in the prior three years, what that's going to give you 00:17:10.099 --> 00:17:13.430 align:middle line:84% is a state of the art warehouse distribution facility. 00:17:13.430 --> 00:17:16.310 align:middle line:84% What that's then going to give you is better ability 00:17:16.310 --> 00:17:21.020 align:middle line:84% to facilitate next-day delivery, which we know from history 00:17:21.020 --> 00:17:25.010 align:middle line:84% comes with better pricing, better volumes, both of which 00:17:25.010 --> 00:17:26.540 align:middle line:90% should improve the margin. 00:17:26.540 --> 00:17:29.240 align:middle line:84% And at the same time, that capital intensity 00:17:29.240 --> 00:17:32.420 align:middle line:84% should come down, further boosting free cash flow 00:17:32.420 --> 00:17:33.530 align:middle line:90% generation. 00:17:33.530 --> 00:17:35.770 align:middle line:84% Or if you look at something like Microsoft, 00:17:35.770 --> 00:17:38.180 align:middle line:84% that's our third-largest overweight. 00:17:38.180 --> 00:17:41.320 align:middle line:84% This is fast becoming the market leader 00:17:41.320 --> 00:17:45.430 align:middle line:84% in cloud computing, an area that we see as high-growth 00:17:45.430 --> 00:17:47.415 align:middle line:90% for many years to come. 00:17:47.415 --> 00:17:50.530 align:middle line:84% But it also has one of the best large language models 00:17:50.530 --> 00:17:53.530 align:middle line:84% in the world with their ChatGPT, which I'm sure many of you 00:17:53.530 --> 00:17:56.440 align:middle line:84% here have used, and that will only further 00:17:56.440 --> 00:17:58.990 align:middle line:90% improve their cloud offering. 00:17:58.990 --> 00:18:02.500 align:middle line:84% And then maybe finally to finish off just on Mastercard. 00:18:02.500 --> 00:18:05.200 align:middle line:84% We see plenty of growth as you go from a cash 00:18:05.200 --> 00:18:07.360 align:middle line:84% to a cashless society, particularly 00:18:07.360 --> 00:18:08.960 align:middle line:90% within the emerging markets. 00:18:08.960 --> 00:18:11.590 align:middle line:84% But don't forget that even in the US alone, 00:18:11.590 --> 00:18:16.960 align:middle line:84% 35% of transactions are still done via cash or via cheques. 00:18:16.960 --> 00:18:20.380 align:middle line:84% I remember going into New York and seeing 00:18:20.380 --> 00:18:23.080 align:middle line:84% someone pay for their supermarket bills with a check. 00:18:23.080 --> 00:18:24.160 align:middle line:90% I was quite stunned. 00:18:24.160 --> 00:18:26.337 align:middle line:84% We don't do that so much in the UK. 00:18:26.337 --> 00:18:28.420 align:middle line:84% But just to give you that feeling that there still 00:18:28.420 --> 00:18:31.360 align:middle line:84% is plenty of growth within the business. 00:18:31.360 --> 00:18:32.920 align:middle line:90% It's asset-light. 00:18:32.920 --> 00:18:36.050 align:middle line:84% And on that point, just to finish off the third point 00:18:36.050 --> 00:18:39.470 align:middle line:84% that there are some commonalities between the names 00:18:39.470 --> 00:18:41.570 align:middle line:84% that you see here, between these top 10 00:18:41.570 --> 00:18:44.660 align:middle line:84% names, which is that a lot of these names are asset-light. 00:18:44.660 --> 00:18:46.550 align:middle line:84% They are high-quality businesses, 00:18:46.550 --> 00:18:49.790 align:middle line:84% they're the market leaders in the industries in which they 00:18:49.790 --> 00:18:52.970 align:middle line:84% operate, we think they do have pricing power, 00:18:52.970 --> 00:18:57.530 align:middle line:84% and they're trading at attractive valuations. 00:18:57.530 --> 00:18:59.735 align:middle line:84% With that, I'm going to hand you over to Tim. 00:18:59.735 --> 00:19:05.110 align:middle line:90% 00:19:05.110 --> 00:19:08.380 align:middle line:84% Thank you, James, and I hope you can all hear me. 00:19:08.380 --> 00:19:10.120 align:middle line:84% So what I'm going to do now is just 00:19:10.120 --> 00:19:14.200 align:middle line:84% take you through a couple of examples of ESG integration 00:19:14.200 --> 00:19:17.350 align:middle line:84% in our process, talk through how we think about integrating that 00:19:17.350 --> 00:19:19.750 align:middle line:84% into fundamentals, we think about risks, 00:19:19.750 --> 00:19:21.940 align:middle line:84% we think about opportunities for these companies, 00:19:21.940 --> 00:19:24.970 align:middle line:84% and how ultimately that does help drive the stock selection 00:19:24.970 --> 00:19:26.380 align:middle line:90% and the position sizing. 00:19:26.380 --> 00:19:29.620 align:middle line:84% So on this first slide, you can see Texas Instruments. 00:19:29.620 --> 00:19:34.840 align:middle line:84% So firstly, we think about the ESG drivers, as we all know. 00:19:34.840 --> 00:19:38.080 align:middle line:84% And one of those, of course, within the framework 00:19:38.080 --> 00:19:40.150 align:middle line:84% of decarbonization is the penetration 00:19:40.150 --> 00:19:42.410 align:middle line:84% of electric vehicles going forward. 00:19:42.410 --> 00:19:44.650 align:middle line:84% So our auto team, our semiconductors team, 00:19:44.650 --> 00:19:47.740 align:middle line:84% our basic materials team all work incredibly closely 00:19:47.740 --> 00:19:50.680 align:middle line:84% to come up with these forecasts, and of course, to understand 00:19:50.680 --> 00:19:54.190 align:middle line:84% what the impact of the very necessary push towards EVs 00:19:54.190 --> 00:19:57.130 align:middle line:84% is on the businesses that are exposed. 00:19:57.130 --> 00:19:59.650 align:middle line:84% Texas Instruments sells semiconductors. 00:19:59.650 --> 00:20:02.660 align:middle line:84% They sell semiconductors into electric vehicles 00:20:02.660 --> 00:20:04.110 align:middle line:90% as a growing market. 00:20:04.110 --> 00:20:05.810 align:middle line:84% And so when we think about the growth 00:20:05.810 --> 00:20:07.590 align:middle line:84% that they're organically going to see, 00:20:07.590 --> 00:20:09.170 align:middle line:84% we think that it's very compelling. 00:20:09.170 --> 00:20:13.550 align:middle line:84% And ultimately, we want to understand the driver, this ESG 00:20:13.550 --> 00:20:17.610 align:middle line:84% driver, and how that's driving revenues for this company. 00:20:17.610 --> 00:20:19.140 align:middle line:84% But of course, there's so much more 00:20:19.140 --> 00:20:20.940 align:middle line:84% to thinking about ESG integration 00:20:20.940 --> 00:20:23.100 align:middle line:84% than just what it's going to do to the top line. 00:20:23.100 --> 00:20:24.390 align:middle line:90% You have to think about risks. 00:20:24.390 --> 00:20:25.890 align:middle line:90% You have to think about costs. 00:20:25.890 --> 00:20:28.500 align:middle line:84% You have to think about appropriate mitigation 00:20:28.500 --> 00:20:29.860 align:middle line:90% of emissions. 00:20:29.860 --> 00:20:32.370 align:middle line:84% And so when we think about what Texas Instruments does 00:20:32.370 --> 00:20:35.460 align:middle line:84% with their suppliers, with their supply chain, when we think 00:20:35.460 --> 00:20:38.430 align:middle line:84% about how they monitor the emissions of their supply chain 00:20:38.430 --> 00:20:40.360 align:middle line:84% and how ultimately they drive change, 00:20:40.360 --> 00:20:42.360 align:middle line:84% that too is where we're very impressed with what 00:20:42.360 --> 00:20:43.570 align:middle line:90% the company does. 00:20:43.570 --> 00:20:46.680 align:middle line:84% They have very tangible targets for short-term emissions 00:20:46.680 --> 00:20:47.190 align:middle line:90% reductions. 00:20:47.190 --> 00:20:51.150 align:middle line:84% Rather than lofty 2050 targets that no one's holding them to, 00:20:51.150 --> 00:20:55.140 align:middle line:90% they have 2025 and 2030 targets. 00:20:55.140 --> 00:20:56.640 align:middle line:84% They engage with their suppliers. 00:20:56.640 --> 00:20:59.400 align:middle line:84% They're looking to really give much better disclosure 00:20:59.400 --> 00:21:01.860 align:middle line:84% around scope 3 emissions, which for any industrial or 00:21:01.860 --> 00:21:03.510 align:middle line:84% semiconductor company, is going to be 00:21:03.510 --> 00:21:05.410 align:middle line:90% a very important part of it. 00:21:05.410 --> 00:21:08.098 align:middle line:84% And we feel it's necessary to understand these to understand 00:21:08.098 --> 00:21:10.140 align:middle line:84% what might happen to the cost base going forward, 00:21:10.140 --> 00:21:13.260 align:middle line:84% to understand the risks if they really 00:21:13.260 --> 00:21:16.590 align:middle line:84% start to see costs imposed on them by governments 00:21:16.590 --> 00:21:17.660 align:middle line:90% around the world. 00:21:17.660 --> 00:21:20.350 align:middle line:84% So again, it's about incorporating all of this 00:21:20.350 --> 00:21:23.343 align:middle line:84% and embedding that, then, in our view of the fundamentals. 00:21:23.343 --> 00:21:24.760 align:middle line:84% So I talked about the revenue side 00:21:24.760 --> 00:21:26.208 align:middle line:90% with electric vehicle growth. 00:21:26.208 --> 00:21:28.000 align:middle line:84% But then, of course, you bring in the costs 00:21:28.000 --> 00:21:29.667 align:middle line:84% and you think about the earnings growth. 00:21:29.667 --> 00:21:32.140 align:middle line:84% And you can see the third point here. 00:21:32.140 --> 00:21:33.610 align:middle line:84% Texas Instruments, we do believe, 00:21:33.610 --> 00:21:36.550 align:middle line:84% will outgrow many of their peers when you 00:21:36.550 --> 00:21:38.280 align:middle line:90% look at the earnings growth. 00:21:38.280 --> 00:21:39.800 align:middle line:90% Now, growth is one part of it. 00:21:39.800 --> 00:21:42.350 align:middle line:84% Valuation, as you heard from Helgi and James, 00:21:42.350 --> 00:21:43.970 align:middle line:90% is another critical part. 00:21:43.970 --> 00:21:46.340 align:middle line:84% And this is where we take those numbers, 00:21:46.340 --> 00:21:48.500 align:middle line:84% we take the integration, and we put it 00:21:48.500 --> 00:21:50.120 align:middle line:90% into our valuation framework. 00:21:50.120 --> 00:21:53.000 align:middle line:84% And you can see here that for us to own Texas Instruments, 00:21:53.000 --> 00:21:55.460 align:middle line:84% we of course want it to look attractively valued 00:21:55.460 --> 00:21:57.740 align:middle line:90% versus its peers. 00:21:57.740 --> 00:22:00.950 align:middle line:84% On the next slide, we're talking about Prologis. 00:22:00.950 --> 00:22:03.470 align:middle line:90% So Prologis is a REIT. 00:22:03.470 --> 00:22:05.690 align:middle line:90% It's a distribution center REIT. 00:22:05.690 --> 00:22:07.460 align:middle line:84% And you think about the growth they've 00:22:07.460 --> 00:22:12.590 align:middle line:84% seen over the past 5, 10, 15, 20 years from e-commerce. 00:22:12.590 --> 00:22:16.460 align:middle line:84% They've become absolutely critical to every commerce 00:22:16.460 --> 00:22:18.890 align:middle line:90% platform in the United States. 00:22:18.890 --> 00:22:21.110 align:middle line:84% That's come with its challenges, though. 00:22:21.110 --> 00:22:24.260 align:middle line:84% Actually having skilled labor to run these distribution centers 00:22:24.260 --> 00:22:26.930 align:middle line:84% when you've seen such fantastic growth in the industry 00:22:26.930 --> 00:22:29.190 align:middle line:84% has become a bit of a bottleneck for them. 00:22:29.190 --> 00:22:32.390 align:middle line:84% And so what they've done is, we think, both a fantastic ESG 00:22:32.390 --> 00:22:34.310 align:middle line:84% initiative, but also something that 00:22:34.310 --> 00:22:36.555 align:middle line:84% really improves the resiliency of their business. 00:22:36.555 --> 00:22:39.180 align:middle line:84% So they've gone out and they've trained through their community 00:22:39.180 --> 00:22:40.170 align:middle line:90% workforce initiative. 00:22:40.170 --> 00:22:44.370 align:middle line:84% 25,000 people are in the process of that up till 2025. 00:22:44.370 --> 00:22:46.835 align:middle line:84% These distribution centers are offered often in communities 00:22:46.835 --> 00:22:48.960 align:middle line:84% where actually there aren't that many other sources 00:22:48.960 --> 00:22:50.080 align:middle line:90% of employment. 00:22:50.080 --> 00:22:51.670 align:middle line:90% But it is a skilled job. 00:22:51.670 --> 00:22:54.660 align:middle line:84% So they go and they train these people, often straight 00:22:54.660 --> 00:22:56.080 align:middle line:90% out of high school. 00:22:56.080 --> 00:22:57.600 align:middle line:84% And at the end of the day, they've 00:22:57.600 --> 00:22:59.940 align:middle line:84% given them a valuable skill and they've given them employment, 00:22:59.940 --> 00:23:00.490 align:middle line:90% too. 00:23:00.490 --> 00:23:02.610 align:middle line:90% Wonderful community initiative. 00:23:02.610 --> 00:23:04.950 align:middle line:84% But equally, it solves a labor shortage problem 00:23:04.950 --> 00:23:07.560 align:middle line:84% which, if they hadn't had the foresight to think about how 00:23:07.560 --> 00:23:09.360 align:middle line:84% to plan for this, could have really 00:23:09.360 --> 00:23:11.940 align:middle line:84% caused issues with their growth going forwards. 00:23:11.940 --> 00:23:14.850 align:middle line:84% You look, too, at the business fundamentals of this company. 00:23:14.850 --> 00:23:16.590 align:middle line:84% One of the key advantages they have 00:23:16.590 --> 00:23:19.020 align:middle line:84% is being in locations where they are not 00:23:19.020 --> 00:23:21.090 align:middle line:90% too far from major cities. 00:23:21.090 --> 00:23:24.720 align:middle line:84% If you're Amazon and you're trying to do one-day delivery, 00:23:24.720 --> 00:23:27.360 align:middle line:84% but your distribution center is 100 miles away, 00:23:27.360 --> 00:23:29.130 align:middle line:90% that's not particularly helpful. 00:23:29.130 --> 00:23:32.280 align:middle line:84% If you can locate close to cities, that is very helpful. 00:23:32.280 --> 00:23:34.440 align:middle line:84% And Prologis has some of the best real estate 00:23:34.440 --> 00:23:38.490 align:middle line:84% of any distribution center REITs in the US. 00:23:38.490 --> 00:23:41.270 align:middle line:84% Down at the bottom here, you can see what this gives you. 00:23:41.270 --> 00:23:44.150 align:middle line:84% It gives you a first quintile valuation signal, so very 00:23:44.150 --> 00:23:46.440 align:middle line:84% attractive; some great earnings growth, 00:23:46.440 --> 00:23:48.920 align:middle line:84% 10% per year over the next five years; 00:23:48.920 --> 00:23:53.030 align:middle line:84% a 4% normalized dividend yield; and a 15% total return, 00:23:53.030 --> 00:23:58.160 align:middle line:84% we believe, for the stock over the coming few years. 00:23:58.160 --> 00:24:01.530 align:middle line:84% Now let's turn to the performance on the next slide. 00:24:01.530 --> 00:24:03.655 align:middle line:84% You heard from Helgi that we've been 00:24:03.655 --> 00:24:05.030 align:middle line:84% very pleased with the performance 00:24:05.030 --> 00:24:06.830 align:middle line:84% in multiple environments, whether it's 00:24:06.830 --> 00:24:08.340 align:middle line:90% growth versus value. 00:24:08.340 --> 00:24:10.880 align:middle line:84% And I think this really puts some numbers around it. 00:24:10.880 --> 00:24:13.320 align:middle line:84% So you can see that in 2020, which was, 00:24:13.320 --> 00:24:17.270 align:middle line:84% of course, a hugely favorable growth environment, 00:24:17.270 --> 00:24:18.740 align:middle line:90% the trust did very well. 00:24:18.740 --> 00:24:23.120 align:middle line:84% In 2022, where the opposite, quite frankly, were very true, 00:24:23.120 --> 00:24:24.480 align:middle line:90% the trust did very well. 00:24:24.480 --> 00:24:25.910 align:middle line:84% And we're looking for consistency. 00:24:25.910 --> 00:24:27.740 align:middle line:84% We're not looking for wild swings 00:24:27.740 --> 00:24:30.560 align:middle line:84% in performance based on factor performance 00:24:30.560 --> 00:24:32.930 align:middle line:84% because we don't believe that's where our insight is. 00:24:32.930 --> 00:24:36.650 align:middle line:84% You heard talk about 80% stock-specific risk. 00:24:36.650 --> 00:24:39.720 align:middle line:84% The way you do that is by being global, by being core, 00:24:39.720 --> 00:24:42.400 align:middle line:84% and by understanding exactly where you have insight. 00:24:42.400 --> 00:24:44.153 align:middle line:84% And I think that underpins everything 00:24:44.153 --> 00:24:45.570 align:middle line:84% that we've seen in the performance 00:24:45.570 --> 00:24:46.957 align:middle line:90% over the past few years. 00:24:46.957 --> 00:24:48.540 align:middle line:84% And for me, it gives me the confidence 00:24:48.540 --> 00:24:50.580 align:middle line:84% in saying that this is repeatable. 00:24:50.580 --> 00:24:52.680 align:middle line:84% Of course, the questions you should be asking us, 00:24:52.680 --> 00:24:54.055 align:middle line:84% and the board should be asking us 00:24:54.055 --> 00:24:56.130 align:middle line:84% as your investment managers, are, 00:24:56.130 --> 00:24:58.650 align:middle line:84% what are the key building blocks that allow you to do this, 00:24:58.650 --> 00:25:00.040 align:middle line:90% and has anything changed? 00:25:00.040 --> 00:25:03.173 align:middle line:84% So when we look at the 80-plus senior research 00:25:03.173 --> 00:25:04.590 align:middle line:84% analysts we have around the world, 00:25:04.590 --> 00:25:07.020 align:middle line:84% we look at the quality of the people we're able to hire, 00:25:07.020 --> 00:25:09.660 align:middle line:84% we look at the very low turnover in these teams, 00:25:09.660 --> 00:25:11.880 align:middle line:84% and we look at, as Helgi talked about, too, 00:25:11.880 --> 00:25:15.690 align:middle line:84% the fantastic data analytics that we have within JP Morgan, 00:25:15.690 --> 00:25:18.150 align:middle line:84% I have to say, I feel very, very good about the future 00:25:18.150 --> 00:25:20.800 align:middle line:84% and how repeatable this performance is. 00:25:20.800 --> 00:25:23.300 align:middle line:84% And maybe the final slide from me is just to talk about some 00:25:23.300 --> 00:25:25.610 align:middle line:84% of the things that have worked over the past year that 00:25:25.610 --> 00:25:27.530 align:middle line:84% have helped this fantastic performance. 00:25:27.530 --> 00:25:30.050 align:middle line:84% So Meta, you can see on the top left there, 00:25:30.050 --> 00:25:32.420 align:middle line:84% has been the single best stock for us. 00:25:32.420 --> 00:25:35.600 align:middle line:84% Now, if you'd spoken to all three of us a year ago, 00:25:35.600 --> 00:25:39.380 align:middle line:84% I think you'd have found us quite frustrated with the name. 00:25:39.380 --> 00:25:42.170 align:middle line:84% They had been spending more, and more, and more 00:25:42.170 --> 00:25:45.900 align:middle line:84% on Reality Labs, which is their Metaverse product. 00:25:45.900 --> 00:25:49.340 align:middle line:84% And I think you certainly will find some healthy skepticism 00:25:49.340 --> 00:25:51.770 align:middle line:84% amongst us here about whether that will ever 00:25:51.770 --> 00:25:53.860 align:middle line:90% be a really viable product. 00:25:53.860 --> 00:25:55.550 align:middle line:84% What we really needed them to stop doing 00:25:55.550 --> 00:25:57.210 align:middle line:90% was spending more money on this. 00:25:57.210 --> 00:25:59.930 align:middle line:84% We wanted them to pull in CapEx, pull in OpEx, 00:25:59.930 --> 00:26:02.540 align:middle line:84% and just allow the core business to truly showcase 00:26:02.540 --> 00:26:05.570 align:middle line:84% its true fundamentals, and that's what they've done. 00:26:05.570 --> 00:26:09.440 align:middle line:84% We've seen fantastic engagement across their platform of apps. 00:26:09.440 --> 00:26:11.630 align:middle line:84% We've seen monetization really improve. 00:26:11.630 --> 00:26:14.360 align:middle line:84% We've seen them considerably outgrow Google, for example, 00:26:14.360 --> 00:26:15.920 align:middle line:90% within digital advertising. 00:26:15.920 --> 00:26:18.020 align:middle line:84% And because they did pull back on the spending 00:26:18.020 --> 00:26:20.180 align:middle line:84% on their Metaverse division, we've 00:26:20.180 --> 00:26:22.560 align:middle line:84% seen the stock work incredibly well, up 00:26:22.560 --> 00:26:26.130 align:middle line:84% over 100% over the past year to the end of September. 00:26:26.130 --> 00:26:29.550 align:middle line:84% Uber, too, another great performer, one where we have, 00:26:29.550 --> 00:26:32.640 align:middle line:84% long-term, a very positive view on the profitability of this. 00:26:32.640 --> 00:26:35.080 align:middle line:84% It's a marketplace business, at the end of the day. 00:26:35.080 --> 00:26:37.800 align:middle line:84% It operates particularly in the US in a duopoly, 00:26:37.800 --> 00:26:40.320 align:middle line:84% and they've been able to supplement the rider business 00:26:40.320 --> 00:26:42.750 align:middle line:84% with a food delivery business, where actually, they've 00:26:42.750 --> 00:26:45.570 align:middle line:84% realized some very significant synergies. 00:26:45.570 --> 00:26:48.120 align:middle line:84% One in particular, if you think about the labor shortages 00:26:48.120 --> 00:26:51.420 align:middle line:84% that we all saw occur in the pandemic. 00:26:51.420 --> 00:26:53.670 align:middle line:84% In the US, depending on the state you're operating in, 00:26:53.670 --> 00:26:56.397 align:middle line:84% it can take anywhere from two weeks to a month 00:26:56.397 --> 00:26:58.230 align:middle line:84% to get a background check back to be allowed 00:26:58.230 --> 00:26:59.970 align:middle line:90% to drive passengers around. 00:26:59.970 --> 00:27:02.350 align:middle line:84% To deliver food, you don't need the background check. 00:27:02.350 --> 00:27:05.550 align:middle line:84% So when Uber's competing with Lyft for a very limited supply 00:27:05.550 --> 00:27:08.760 align:middle line:84% of drivers, if you can onboard somebody straight away 00:27:08.760 --> 00:27:11.130 align:middle line:84% and they can start earning revenue straight away, 00:27:11.130 --> 00:27:13.150 align:middle line:84% that's a very compelling proposition. 00:27:13.150 --> 00:27:15.100 align:middle line:84% And we saw that they benefited from that. 00:27:15.100 --> 00:27:18.330 align:middle line:84% So I think we truly appreciate the structural characteristics 00:27:18.330 --> 00:27:20.580 align:middle line:84% of their business and the opportunity they have ahead 00:27:20.580 --> 00:27:22.410 align:middle line:90% of them. 00:27:22.410 --> 00:27:24.630 align:middle line:84% You can see the two of those stocks contributed 00:27:24.630 --> 00:27:27.750 align:middle line:84% on the bottom to media being the very best sector that we've 00:27:27.750 --> 00:27:28.260 align:middle line:90% had. 00:27:28.260 --> 00:27:30.720 align:middle line:84% But I would point more, honestly, 00:27:30.720 --> 00:27:35.280 align:middle line:84% to diversification of the excess performance that we've seen. 00:27:35.280 --> 00:27:37.000 align:middle line:90% It's not just one sector. 00:27:37.000 --> 00:27:38.850 align:middle line:84% This is not a technology portfolio. 00:27:38.850 --> 00:27:41.348 align:middle line:84% This is a diversified portfolio where 00:27:41.348 --> 00:27:43.140 align:middle line:84% we're focused on where we have the insights 00:27:43.140 --> 00:27:44.282 align:middle line:90% within each sector. 00:27:44.282 --> 00:27:46.740 align:middle line:84% And to the point about it not being a technology portfolio, 00:27:46.740 --> 00:27:49.050 align:middle line:84% you can see that, initially, we didn't own NVIDIA. 00:27:49.050 --> 00:27:50.550 align:middle line:90% And that has been painful. 00:27:50.550 --> 00:27:54.700 align:middle line:84% That cost us 61 basis points of performance over the past year. 00:27:54.700 --> 00:27:56.970 align:middle line:84% And I think this speaks to, as investors, 00:27:56.970 --> 00:27:58.680 align:middle line:84% you have to be ready to change your mind. 00:27:58.680 --> 00:28:01.500 align:middle line:84% We certainly did not appreciate the advantage 00:28:01.500 --> 00:28:05.040 align:middle line:84% that NVIDIA had six, nine months ago in a market that 00:28:05.040 --> 00:28:08.790 align:middle line:84% was growing, quite frankly, much more rapidly than we realized. 00:28:08.790 --> 00:28:11.820 align:middle line:84% When they reported the truly fantastic results in May, 00:28:11.820 --> 00:28:14.850 align:middle line:84% and they've continued to report great results since, we took 00:28:14.850 --> 00:28:16.350 align:middle line:84% a step back and we said, OK, we need 00:28:16.350 --> 00:28:17.475 align:middle line:90% to assess the fundamentals. 00:28:17.475 --> 00:28:18.960 align:middle line:84% We need to look at what's changed 00:28:18.960 --> 00:28:20.793 align:middle line:84% and we need to make a dispassionate decision 00:28:20.793 --> 00:28:23.550 align:middle line:84% about whether, even after a fantastic rally for the stock, 00:28:23.550 --> 00:28:25.020 align:middle line:90% we should be buying it. 00:28:25.020 --> 00:28:27.570 align:middle line:84% The answer, in short, was, yes, we absolutely should. 00:28:27.570 --> 00:28:30.990 align:middle line:84% NVIDIA is dominant within the AI space. 00:28:30.990 --> 00:28:34.270 align:middle line:84% It's a market which is seeing enormous spend right now. 00:28:34.270 --> 00:28:36.713 align:middle line:84% And more importantly, it's a market 00:28:36.713 --> 00:28:38.630 align:middle line:84% where you're seeing real returns on investment 00:28:38.630 --> 00:28:40.080 align:middle line:90% for companies that are spending. 00:28:40.080 --> 00:28:42.420 align:middle line:84% We've done a number of meetings over the past few weeks 00:28:42.420 --> 00:28:45.510 align:middle line:84% with companies like Intuit, who are benefiting 00:28:45.510 --> 00:28:47.910 align:middle line:84% from the wonderful data source that they have, 00:28:47.910 --> 00:28:51.990 align:middle line:84% and they're using AI to drive much better adoption 00:28:51.990 --> 00:28:53.960 align:middle line:90% of their products. 00:28:53.960 --> 00:28:56.170 align:middle line:84% This is why we believe in NVIDIA. 00:28:56.170 --> 00:28:58.360 align:middle line:84% This is not the dot com bubble, where 00:28:58.360 --> 00:28:59.920 align:middle line:84% companies' valuations were shooting 00:28:59.920 --> 00:29:02.290 align:middle line:84% through the roof with absolutely no evidence. 00:29:02.290 --> 00:29:03.988 align:middle line:90% There is evidence right now. 00:29:03.988 --> 00:29:05.530 align:middle line:84% And so we changed our mind on NVIDIA. 00:29:05.530 --> 00:29:07.400 align:middle line:84% We bought the stock, even after a rally. 00:29:07.400 --> 00:29:09.317 align:middle line:84% And that's actually, over the past six months, 00:29:09.317 --> 00:29:11.430 align:middle line:90% been incredibly beneficial. 00:29:11.430 --> 00:29:13.980 align:middle line:84% Maybe one final stock to talk about here 00:29:13.980 --> 00:29:18.390 align:middle line:84% is NextEra Energy, which again, has detracted from returns. 00:29:18.390 --> 00:29:20.370 align:middle line:84% The significant run up in bond yields 00:29:20.370 --> 00:29:22.325 align:middle line:84% that we've seen over the past few months 00:29:22.325 --> 00:29:23.700 align:middle line:84% has, of course, hit those sectors 00:29:23.700 --> 00:29:26.550 align:middle line:84% which are considered bond proxies in a very major way. 00:29:26.550 --> 00:29:28.830 align:middle line:84% So utilities has been the worst-performing sector 00:29:28.830 --> 00:29:31.590 align:middle line:84% over the past three months by far. 00:29:31.590 --> 00:29:33.820 align:middle line:90% NextEra is a renewable play. 00:29:33.820 --> 00:29:37.660 align:middle line:84% It also has a regulated utility, and it does have some leverage. 00:29:37.660 --> 00:29:39.840 align:middle line:84% So the market has been asking itself, 00:29:39.840 --> 00:29:41.818 align:middle line:84% in a higher cost of capital world, 00:29:41.818 --> 00:29:43.860 align:middle line:84% what does that mean for growth and what does that 00:29:43.860 --> 00:29:46.290 align:middle line:90% mean for interest expense? 00:29:46.290 --> 00:29:49.980 align:middle line:84% In short, we don't believe that renewables is dead. 00:29:49.980 --> 00:29:53.610 align:middle line:84% You heard me talk about the ESG drive. 00:29:53.610 --> 00:29:56.427 align:middle line:84% But actually, it's the cost advantage and the stability 00:29:56.427 --> 00:29:58.260 align:middle line:84% that some renewables can bring, particularly 00:29:58.260 --> 00:30:00.150 align:middle line:84% solar and onshore wind, which are 00:30:00.150 --> 00:30:04.440 align:middle line:84% very helpful for supplementing the generation on the grid. 00:30:04.440 --> 00:30:07.410 align:middle line:84% NextEra is the largest renewable producer in the US. 00:30:07.410 --> 00:30:09.150 align:middle line:84% They have significant cost advantages 00:30:09.150 --> 00:30:12.340 align:middle line:84% as a result. In a higher cost of capital world, actually, 00:30:12.340 --> 00:30:14.230 align:middle line:84% we think that they are likely, by far, 00:30:14.230 --> 00:30:17.020 align:middle line:84% to be the one that succeeds versus everybody else. 00:30:17.020 --> 00:30:18.520 align:middle line:84% They just had a record quarter where 00:30:18.520 --> 00:30:21.440 align:middle line:84% they had record additions to the renewables backlog. 00:30:21.440 --> 00:30:24.490 align:middle line:84% And so we think rumors of renewables' demise 00:30:24.490 --> 00:30:26.140 align:middle line:90% are greatly exaggerated. 00:30:26.140 --> 00:30:28.720 align:middle line:84% As a result, we do not worry about-- 00:30:28.720 --> 00:30:32.210 align:middle line:84% even when we model a higher cost of debt, 00:30:32.210 --> 00:30:34.100 align:middle line:84% we do not worry about this business. 00:30:34.100 --> 00:30:36.130 align:middle line:84% And so we're perfectly comfortable living 00:30:36.130 --> 00:30:39.910 align:middle line:84% through the volatility but continuing to own the name. 00:30:39.910 --> 00:30:41.890 align:middle line:84% So I think with that, we'll pause. 00:30:41.890 --> 00:30:45.030 align:middle line:84% And we're delighted to take your questions. 00:30:45.030 --> 00:31:00.000 align:middle line:90%