Dec 2009 Quarterly Report - WIOF Global Utilities Fund
Dec 2010 Quarterly Report - WIOF Global Utilities Fund
1. WIOF Global Listed Utilities Fund December
2010
Performance Summary (total return before fees) Performance 1
2
1 Month 3 Months 12 Months Inception
WIOF Global Listed Utilities Fund 2.9% 2.8% 3.2% 15.1%
Benchmark (UBS Developed Infrastructure & Utilities Index 3) 3.6% 3.5% 3.8% 14.8%
Overview Sector Allocation
The fund s share price increased by 2.8% over the quarter, compared to a 3.5% Rail
Airports
2% Ports
3%
increase in our benchmark index. Stock selection was the primary reason for our Toll Roads
4%
5%
underperformance compared to the benchmark.
Communications
Infrastructure
5%
Equity markets in most regions experienced strong gains over the quarter. The
S&P 500 rose by 10.8%, Germany s DAX Index by 11.0%, and the Nikkei by 9.3%. Generation
4%
The performance of utility stocks lagged the broader market as market participants
sought exposure to riskier stocks. Utilities and infrastructure stocks rose by 3.4% Semi Regulated
Utility
in the US, 4.6% in Germany and only 0.2% in Japan. Investors desire to increase Regulated Utility 57%
their exposure to riskier stocks was driven by improving economic data out of the 20%
US in particular, with retail sales improving significantly and new unemployment
claims falling substantially in December, the number of Americans filing to
receive jobless claims dropped to the lowest level in over two years.
Geographic Allocation
Canada
In contrast, investors deserted markets in countries with sovereign risk concerns, Japan 6%
with Spain s IBEX 35 index falling by 4.8% and Italy s MIB 40 Index falling by 5%
1.1%. The fund disposed of its small position in Spanish stocks during the quarter
and currently has no exposure to Spain and a very limited exposure to Italy. UK
13%
The best performing stocks in the fund over the quarter were Flughafen Wien
US
(Vienna airport) +17.2%, Fortum (a merchant generator servicing Finland and 53%
Sweden) +13.9% and Severn Trent +11.6% (a UK water utility). The worst
performing stocks were DTE Energy -3.6% (a US electricity utility), Sempra Energy
-5.2% (a US electricity and gas utility and pipeline operator) and Osaka Gas Co Europe ex UK
23%
-8.5% (a gas utility in Osaka).
Portfolio Changes Top 5 Holdings
During the quarter, we established positions in Vinci (a toll road operator in
% of
France), Inmarsat (a satellite operator), Canadian Utilities (an electricity and gas Company Name Country Sector Portfolio
utility in Canada), GDF Suez (a global transporter and distributor of natural gas) Consolidated Edison US Transmission & Distribution 4.8%
and UGI (a US electricity and gas utility). We exited positions in RWE (a German Vopak Netherlands Ports 4.6%
electricity utility with merchant generation operations), E.On (a pan European Sempra Energy US Integrated 4.5%
electricity utility with merchant generation operations), Enagas (the Spanish gas SCANA US Integrated Regulated 4.0%
transmission system operator) and Red Electrica (the operator of the Spanish Vinci France Toll Roads 3.9%
electricity transmission grid) given our concerns over sovereign risk in Spain.
Outlook
Equity markets will be impacted by some strong opposing forces in 2011, with improving economic fundamentals, particularly in the US,
providing positive impetus to equities, but with concerns about many governments ability to repay their large debt burdens having a negative
impact. We expect that the Federal Reserve and the European Central Bank will continue to maintain interest rates at very low levels and that
the ECB will continue to provide large amounts of liquidity to the banking system. Clearly, both the Fed and the ECB have decided that their
role in maintaining the stability of the banking system will continue to take overwhelming precedence over their role in keeping inflation at
acceptable levels. As such, we expect the highly accommodative monetary policy of both the Fed and the ECB to continue for quite some
time. Furthermore, the Eurozone members are clearly taking a whatever it takes attitude to defending the Euro. As such, we expect more
bailouts to be provided to those Eurozone states who are unable to obtain sufficient debt from international bond markets and an increase in
the size of bailouts already provided. This excess liquidity must go somewhere and some of it will likely flow into equity markets. Combined
with this is the fact that both institutional and retail investors have an underweight exposure to equities in historical terms and we would
expect increased inflows into equity markets from both institutional and retail investors compared to 2011 levels. On balance, we expect that
the combination of increased inflows from retail and institutional investors and the increased liquidity being provided by the Fed and the ECB
will drive equities in the US, UK and core European markets such as Germany and France higher in the short term at least. In contrast, we
expect those European countries with higher levels of sovereign risk, such as Spain and Italy to perform relatively poorly.
1
Performance is calculated on I class shares, pre management fees of between 1.50% and 2.25% per annum
2
Performance inception date is 31 July 2009
3
The UBS Developed Infrastructure & Utilities Index is a USD hedged, total return index
IMPORTANT NOTES
This report has been prepared for information only, and it does not represent an offer to purchase or subscribe for shares. While Nucleus Global Investors Pty Ltd ( Nucleus ) believes that the information is correct at the date of
production, no warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information, which may be subject to change at any time, without notice. Returns can be
volatile, reflecting increases and decreases in the value of underlying investments. Changes in market conditions and exchange rates can cause a decrease or an increase in the share value. Past performance does not guarantee the same
results in the future.
The WIOF Global Listed Utilities Fund (the Fund ) is a sub fund of World Investment Opportunities Funds (the SICAV ), an open-ended investment company registered on the official list of collective investment undertakings pursuant to
part I of the Luxembourg law of 20th December 2002 on collective investment undertakings (the 2002 Law ). Julius Baer (Luxembourg) S.A is the designated management company of the SICAV, authorised under the provisions of
Chapter 13 of the 2002 Law. Applications can only be made on the form in the current WIOF Prospectus dated April 2010. Prospectus can be obtained by contacting the Nucleus investment team on
+61 2 9356 2866, by fax +61 2 9357 6640, or by emailing kteale@nucleusglobal.com.au or at http://www.wiof.eu/institutional/download/prospectus/. Before investing in the Fund, investors should contact their financial adviser and refer
to all relevant documents relating to the Fund, such as the latest annual report and prospectus, which specify the particular risks associated with the Fund, together with any specific restrictions applying, and the basis of dealing. In the
event an investor chooses not to seek advice from a financial adviser, he should consider whether the Fund is a suitable investment for him.