Navigating the new reality of investing

PPS Global Equity Fund – incorporating Capital Group New Perspective strategy*

Stocks and bonds rarely decline in tandem, but 2022 was one of only a few exceptions over the past 45 years to have done so – showcasing just how difficult it had been for investors globally.

But this is why experience matters. Throughout its 50-year history, the Capital Group New Perspective strategy, which powers the PPS Global Equity Fund, has successfully invested through change. Over its lifetime, it has navigated the 1970s energy crisis, various inflationary environments, unprecedented swings in exchange rates, seismic shifts in the structure of the global economy, multiple recessions and financial bubbles, unparalleled monetary policy experiments, and a global health pandemic.

A proven track record of navigating different market environments

New Perspective strategy as of 31 December 2022 since inception in March 1973

Past results are not a guarantee of future results.

As of 31 December 2022. Returns in US$ terms. Results shown for the Capital Group New Perspective Composite are asset-weighted and based on initial weights and monthly returns. Relative returns calculated geometrically for the Capital Group New Perspective Composite, compared with MSCI All Country World Index (ACWI) (with net dividends reinvested) from 30 September 2011; previously MSCI World (with net dividends reinvested). Gross management fees and expenses. Sources: Capital Group and MSCI, unless otherwise specified.

1. MSCI ACWI (with net dividends reinvested) from 30 September 2011; previously MSCI World (with net dividends reinvested).
2. Relative return of MSCI ACWI World Growth and MSCI ACWI World Value (with net dividends reinvested) used to determine when “value outperforms growth” and “growth outperforms value” from 30 September 2011; previously MSCI World (Growth and Value).
3. Based on US inflation rates using the Consumer Prices Index (CPI). Source: FactSet, January 2023.

The key to New Perspective’s resilience and consistency lies in its structural flexibility. This allows portfolio managers (PMs) to reposition on a multi-year basis to capture structural changes in the global economy and long-term equity market leaders. It is deliberately not positioned for a single outcome or ‘type’ of the short-term market environment and has the flexibility to invest in any type of company regardless of geography, sector or style. This is important as markets have been extremely volatile since the COVID-induced downturn of 2020. That was followed by a strong resurgence in market prices before another decline triggered by war in Ukraine, high inflation, and higher interest rates. It can be a thankless task trying to react to every news and event, which is why PMs have remained focused on our key competitive advantage – selective investing grounded in bottom-up, fundamental research and always adopting a long-term investment horizon.

Over the past several years, there has been a steady reduction in higher valued, growth companies, with that reduction gathering pace in 2022 given the structural changes we are witnessing. PMs are becoming even more selective about higher-growth companies and continue to favour firms with potentially more durable and visible earnings.

Notable 2022 reductions

• E-commerce and payment platforms: A highly competitive landscape, slowing post-COVID growth, and pressure on margins mean PMs are increasingly conscious of stocks with higher valuations.
• Semiconductors: A combination of profit-taking and recognition of a cyclical downturn in the industry. Over the longer term, however, semiconductors are set to continue to be a key enabler of the digital economy and some of New Perspective’s largest investments are in selected semiconductor and equipment manufacturers.
• Internet-based media and entertainment: Online advertising spending is expected to take a hit given the weak global economic outlook.

Notable 2022 additions

• Large-cap pharmaceutical companies: Especially those with strong franchises, resilient earnings, and healthy balance sheets. Exposure to the healthcare sector has increased substantially and is now at an all-time high.
• Energy and materials-related companies: This includes direct beneficiaries of favourable long-term supply-demand characteristics by forming part of the solution to decarbonise the global economy. These include mining companies mining the metals required to electrify the global economy and selected oil and gas companies transitioning to more renewable power generation.
• Industrials: Companies that are exposed to secular growth trends, including construction equipment and HVAC (heating, ventilation and air conditioning) providers that will help increase the energy efficiency of buildings and infrastructure.

Falling to rising rates, narrow to broad market leadership, and global to regional supply chains – these are just some of the seismic shifts that will likely define the next decade of investing. Even though the outlook has evolved from a decade of sunny skies to darker clouds, New Perspective’s structural flexibility and diversification may provide a durable outcome as PMs are able to reorientate the portfolio based on their long-term investment convictions. In addition, our long-term investment horizon allows us to take advantage of market dislocations and invest in companies that we believe will prosper over a period of years.

Risk factors you should consider before investing:

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
• Depending on the strategy, risks may be associated with investing in fixed income, derivatives, emerging markets, and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.

This communication is issued by Capital International Limited (authorised and regulated by the UK Financial Conduct Authority), a subsidiary of the Capital Group Companies, Inc. (Capital Group). While

Capital Group uses reasonable efforts to obtain information from third-party sources which it believes to be reliable, Capital Group makes no representation or warranty as to the accuracy, reliability, or completeness of the information. This communication is not intended to be comprehensive or to provide investment, tax, or other advice.
© 2023 Capital Group. All rights reserved

*Please note the strategy performance does not in any way reflect the performance of the PPS Global Equity Fund. Capital group is the partnership manager for the PPS Global Equity Fund.

The information, opinions, and any communication from PPS Investments Group, whether written, oral, or implied are expressed in good faith and not intended as investment advice, nor does it constitute an offer or solicitation in any manner. Furthermore, all information provided is of a general nature with no regard to the specific investment objectives, financial situation, or particular needs of any person. It is recommended that investors first obtain appropriate legal, tax, investment, or other professional advice prior to acting upon such information.

Collective Investment Schemes in Securities (CIS) are generally medium to long-term investments. The value of participatory interests (units) may go down as well as up, and past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending up to 10% of the market value of the portfolio to bridge insufficient liquidity. A schedule of fees and charges and maximum commissions is available on request from the manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. The manager does not provide any guarantee either in respect of the capital or the return of a portfolio. Certain funds may be exposed to foreign securities and as such, may be subject to additional risks brought about by this exposure.

Performance has been calculated using net NAV to NAV numbers with income reinvested. Annualised performance is the average return earned on an investment each year over a given time period.

PPS Investments Group is a subsidiary of Professional Provident Society Insurance Company Limited, a Licensed Insurer, and Financial Services Provider. PPS Investments Group consists of the following authorised Financial Services Providers: PPS Investments (Pty) Ltd(“PPSI”), PPS Multi-Managers (Pty) Ltd(“PPSMM”), and PPS Investment Administrators (Pty) Ltd(“PPSIA”); and includes the following approved Management Company under the Collective Investment Schemes Control Act: PPS Management Company (RF) (Pty) Ltd (“PPS Manco”). Financial services may be provided by representative(s) rendering financial services under supervision.

"The PPS Global Equity Fund is registered and approved for marketing in South Africa under section 65 of the CISCA. The PPS Global Equity Fund is a sub-fund of the Prescient Global Funds ICAV.