- Kempen
- Kempen Lux European High Dividend Fund Class I
Kempen (Lux) European High Dividend Fund - Class I
Profile
The Fund primarily aims to generate a better long-term total return than the MSCI Europe Total Return Index (net dividends reinvested), comprising capital gains or losses plus net dividend.
Management team
Performance per 2020-05-31 (rebased)
Performance per 2020-05-31
| Fund | Benchmark | |
|---|---|---|
| 1 month | 2.7 % | 3.0 % |
| 3 months | -11.3 % | -6.4 % |
| This year | -22.4 % | -15.4 % |
| 2017 | 10.2 % | 10.3 % |
| 2018 | -8.2 % | -10.6 % |
| 2019 | 17.0 % | 26.0 % |
| 1 year (on annual basis) | -14.3 % | -4.2 % |
| 3 years (on annual basis) i | -5.4 % | -1.3 % |
| 5 years (on annual basis) i | -2.9 % | -0.3 % |
| Since inception (on annual basis) i | 5.9 % | 7.6 % |
Key figures
| Total fund size | EUR 14.34 M 2020-05-31 |
| Share class size | EUR 0.40 M 2020-05-31 |
| Number of shares | 240 2020-05-31 |
| Net Asset Value i | EUR 1,739.37 2020-07-03 |
| Turnover rate | 34.75 % |
| Morningstar rating â„¢ | |
| Morningstar Analyst rating | Gold |
Fund characteristics per 2020-05-31
| Fund | Benchmark | |
|---|---|---|
| Number of holdings | 50 | 436 |
| Dividend yield i | 5.70 % | 3.71 % |
| Weighted average market capitalization i | EUR 37,171 M | EUR 68,824 M |
| P/E ratio i | 14.27 | 18.47 |
| Active share i | 81.28 % |
Market developments per 2020-05-31
The Fund has so far failed to show its relatively defensive character during the market downturn. The attractive valuation of the portfolio in combination with the solid financial position of the companies we invest in should have provided a safety net. However, the uniqueness of this crisis has prevented the portfolio from showing its defensiveness so far. We see a clear schism in the market; where a large part of the market has been hit hard by the COVID-19 crisis, a significant part of the market (the part that largely pays no dividends) are priced as if they will be unaffected. We are confident however that the portfolio will show attractive risk return characteristics over the next 3 to 5 years, with an attractive and growing dividend income stream. We continue to diligently execute our investment process. As is the case with every crisis, it also offers attractive new opportunities. We have already added a number of new attractive companies to the portfolio and are confident that we will find more.
The most striking fact this year is that the ‘Quality Bubble’ has become even more extreme. A huge valuation dispersion between quality- and value stocks has been present for some time in the market, which has now reached levels never seen before. This month growth stocks strongly outperformed value stocks again, which was a headwind for the relative performance. You need to go back to the IT-bubble at the start of this century to find comparable valuation dispersions. Going forward, we see this as a huge opportunity when the market will focus more on attractively valued shares.
Portfolio developments per 2020-05-31
This month, the Fund had both negative sector allocation and slightly positive stock selection. In particular selection within industrials and materials was positive. Sector allocation was negative as we are overweight the financial and energy sector. The energy sector lagged despite the oil price recovering sharply in May.
In our investment process, we spend a large portion of our time understanding where profitability should be on an over the cycle basis, as this is what determines the cash flows we will receive as a long-term shareholder. A firm may appear attractive based on its price to earnings ratio or other headline multiple, but if margins and/or revenue are high, this only gives you limited information about the future returns of an investment. In a diversified portfolio, we are always going to have individual names that disappoint or surprise to the upside. We believe that a value process of bottom up stock picking will lead to more winners than losers, as our long-term track record indicates. We continue to purchase our investments based on intrinsic value, while ensuring a margin of safety when we select our stocks.
After the sharp selloff of the equity market during the year, our return expectations for the broad market have increased. Valuation dispersion between, and within regions and sectors have further increased this year and are now close to the peak of the technology bubble (please see the slide below for the valuation difference of growth versus value). The European Dividend strategy trades at an exceptional discount versus the market. Historically, this has led to a strong relative performance on the medium term. Also, the absolute valuation of the strategy is compelling. In summary, the current environment offers the opportunity to buy a well-diversified portfolio with solid earnings power at an attractive valuation.
Based on our current conservative estimates, we expect a forward dividend yield of around 4%. Obviously, this is indicative and based on a very uncertain outlook and on current figures and estimates.
Performance per 2020-05-31 (rebased)
Performance per 2020-05-31
| Fund | Benchmark | |
|---|---|---|
| 1 month | 2.7 % | 3.0 % |
| 3 months | -11.3 % | -6.4 % |
| This year | -22.4 % | -15.4 % |
| 2017 | 10.2 % | 10.3 % |
| 2018 | -8.2 % | -10.6 % |
| 2019 | 17.0 % | 26.0 % |
| 1 year (on annual basis) | -14.3 % | -4.2 % |
| 3 years (on annual basis) i | -5.4 % | -1.3 % |
| 5 years (on annual basis) i | -2.9 % | -0.3 % |
| Since inception (on annual basis) i | 5.9 % | 7.6 % |
Dividends
| Distributing | No |
Risk analysis (ex post) per 2020-05-31
| 3 years | Since inception | |
|---|---|---|
| Maximum drawdown i | -29.46 % | -29.46 % |
| Tracking error i | 4.47 % | 3.40 % |
| Information ratio i | -0.91 | -0.51 |
| Beta i | 1.14 |
Top 5 contribution (2020-05-31)
| Contribution i | Performance i | |
|---|---|---|
| ALD | 0.37 % | 18.38 % |
| Siemens | 0.36 % | 16.30 % |
| EDP - Energias de Portugal | 0.35 % | 15.06 % |
| SKF AB-B Shares | 0.30 % | 13.55 % |
| Vodafone Group | 0.30 % | 14.62 % |
Bottom 5 contribution (2020-05-31)
| Contribution i | Performance i | |
|---|---|---|
| AIB Group | -0.39 % | -20.08 % |
| Baloise | -0.15 % | -6.48 % |
| Wood Group | -0.13 % | -8.38 % |
| Royal Dutch Shell | -0.12 % | -7.41 % |
| Enagas | -0.12 % | -5.10 % |
Geographic allocation (2020-05-31)
Top 10 holdings (2020-05-31)
Sector allocation (2020-05-31)
Ongoing charges
| Management fee i | 0.70 % |
| Service fee i | 0.20 % |
| Taxe d'abonnement i | 0.01 % |
| Expected ongoing charges i | 0,91 % |
Share class details
| Share class | I i |
| Investor type | Institutional |
| Distributing | No |
| Benchmark i | MSCI Europe Total Return Net Index |
| Investment category | High Dividend Equity |
| Universum | European equities |
| Inception date | 2011-08-25 |
| Domicile | Luxembourg |
| May be offered to professional investors only in | Belgium, Finland, France, Germany, Italy, Luxembourg, Spain, Sweden, Switzerland, The Netherlands, United Kingdom |
| UCITS status i | Yes |
| Status | Open-end i |
| Base currency | EUR |
| Share class currency | EUR |
| Management company | Kempen Capital Management N.V. |
| Depositary and custodian | J.P. Morgan Bank Luxembourg S.A. |
| Morningstar rating â„¢ | |
| Morningstar Analyst rating | Gold |
Tradability
| Minimum subscription | Initial subscription: €50.000, additional subscriptions: €10,000 |
| Listed | no |
| Subscription/Redemption Frequency | Daily |
| ISIN i | LU0427930275 |
Factsheets
Annual Reports
Semi- Annual Reports
Key Investor Information
Formal documents other
Kempen's vision and mission
Kempen Capital Management is an asset manager that believes in stewardship and investment focusing on the long-term for the benefit of all stakeholders. Value creation is at the heart of the services we provide to our clients. We believe that being an engaged shareholder on environmental, social and governance (ESG) issues and retaining a long-term focus, is critical to helping our clients to preserve and create sustainable wealth that has positive real world impact and economic returns.
Kempen wide approach to responsible investment
We are committed to create sustainable alpha. The four pillars of our ESG-policy are:
-
ESG integration: Ensuring sustainability risks and opportunities are adequately considered in our investment analysis and processes.
-
Exclusion & avoidance: Not investing in companies involved in controversial activities or conduct.
-
Active ownership: Being responsible stewards of our clients’ capital and using our influence through engagement and voting to improve corporate behaviour on specific ESG issues and achieve positive change
-
Positive impact: Investing with an objective to achieve positive real world outcomes and impact, such as contributing to the UN Sustainable Development Goals.
Â
To put our mission and vision into practice we engage with our investee companies on a wide array of strategic, financial, and ESG topics. As an active owner we use our influence to improve our investee companies’ ESG performance. This helps us address some of the most pressing and important sustainability issues facing business and the world. Our focus themes for engagement are: human rights, labour rights, climate change and governance.
Â
Through collaboration with other investors and industry think tanks we contribute to the development of principles and standards of corporate responsibility both at sector levels, as well as investee company level.Â
Â
Our full voting records are available here.
Our fund approach to responsible investment
Kempen’s ESG policy is fully implemented in our fund’s investment process across the three relevant pillars of:  Exclusion, Integration and Active ownership.
Â
1. Exclusion
The fund follows the clear and transparent exclusion framework developed by Kempen. According to the framework the fund currently excludes companies involved in the production of controversial weapons and tobacco. Furthermore, the strategy avoids investments in companies that structurally violate ESG criteria, with no willingness to improve. In total 13 companies are excluded from the fund’s European equity universe.
Â
2. ESG integration
ESG criteria are an integral part of the investment process. The aim is to incorporate material ESG issues in our fundamental analysis. This means that portfolio managers perform an in-depth analysis of ESG data and material ESG risks and reflect them in the assumptions used in the valuation assessment. For example, as demonstrated in the chart on the right side, the ESG impact forms part of our Earnings Power Value (EPV) valuation model.
Â
3. Active ownership: Engagement
The aim of the engagements our fund participates in is to use our influence as a shareholder to encourage the companies we invest in to improve policies and practices in specific ESG issues. A successful engagement reduces the ESG risk and as a result unlocks value in the interest of our clients. In 2018 we held as a team over 200 company engagements on a range of topics. Â
Â
In order to lay out our guiding investment principles, we send a “welcome letter†to most of the companies we invest in. In this letter, we explain to the company why we made the decision to invest and what our long-term expectations are, including those in the areas of social and environmental responsibilities and corporate governance.Â
Â
Our fund also believes in the strength of collaborative engagement. Through cooperation with other investors and fund managers, we can increase the leverage of our engagement activities. In 2018, for example, we participated in the CIO Exchange Collaboration on Energy transition.
Â
Our engagement focus is on: climate change and energy efficiency, and corporate governance. For example recent activities include:Â
-
Shell: We engaged with senior management to set carbon targets with success as Shell announced that it will link its scope 1, 2 and 3 carbon targets to its remuneration. You can find the engagement factsheet here.
-
Severstal: We are monitoring Severstal’s health & safety efforts and encouraging the company to establish health & safety best practices that set an example to other Russian steel producers. As a result of the engagement, the company is working on a revised policy and process on labour. You can find the engagement factsheet here.
Â
3. Active ownership: Voting
Exercising our voting rights is also an essential part of the responsible investment philosophy of our fund. We analyse each vote on a case by case basis and often inform the company about our voting intention ahead of the meeting. Where there is a recommendation to vote against management, we ask the company to clarify their viewpoints. In 2018 we voted at a total of 104 shareholder meetings.
Â
Risks
For more information about the mid and long term risks associated with the investments:
*
Although Kempen Capital Management N.V.’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Partiesâ€), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
ESG Report
