The rise and rise of the stock picker

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  • 33 mins 07 secs
Chris St. John, Portfolio Manager of the AXA Framlington UK Mid Cap Fund and AXA WF – Framlington UK, discusses why he believes the relevance of stock picking is rising, the earnings growth as the principal driver of returns and where he sees long-term investment opportunities for the funds he manages.



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ROB BAILEY: Welcome to today’s AXA Investment Managers webcast. I’m Rob Bailey. I’m Head of UK Wholesale Distribution at AXA Investment Managers. And today I’m joined by Chris St John.


ROB BAILEY: Chris is one of our UK fund managers on the AXA Framlington team within our business. And he’s the Fund Manager of the AXA Framlington UK Mid Cap Fund and the AXA World Funds – Framlington UK. Chris, welcome, today we’re going to talk about the two funds you run. We’ll talk about the UK market in general. First of all, I’d like to talk about the team that you work with. Because you obviously work very closely with Dan Harlow, but the UK equities team within AXA Framlington is a pretty substantial number of people.

CHRIS ST JOHN: Yes, we work very closely together. It’s a very collegiate atmosphere. I sit next to Dan who manages the small cap fund and Nigel Thomas as well who manages UK select opportunities. We sit in a wider team of eight sharing information. We meet many companies between us, individually and as a team, and that really helps to focus our energy onto the sort of right areas of the market where companies have got a chance of prospering, and it really helps with the stock picking as well.

ROB BAILEY: And you work in a very stock specific kind of way, don’t you?

CHRIS ST JOHN: Yes, we do. I mean there are three sort of arrows to the investment philosophy. One is a strategic overlay. So it’s just trying to find companies that have got economic tailwinds rather than headwinds. So companies where management make decisions, you know, they’re getting some benefit from the markets. Valuation is an important part of the process. And the third and really the most important is that bottom-up stock picking, and that’s based principally on company meetings. There are competitors that don’t meet companies. We think it’s very important to meet the chief execs, the finance directors, the people who are driving the strategy, and really understand what motivates them, how they’re incentivised, and really get a very good understanding of company strategy and the wider market and competitive environment as well.

ROB BAILEY: We’re going to talk a little bit about the two funds in question that you manage.

First of all is the AXA Framlington UK Mid Cap Fund. The graph in front of you is showing the performance of the Fund going back to launch in March 2011. The Fund’s performed really strongly throughout that period. Over the five years it’s 13th out of 217. It’s amongst the all companies sector, so it’s obviously competing with a wide range of funds. But the performance has been very strong on that. And we’ll come back and perhaps examine that in a bit more detail later on.

The other fund we’ll talk about is the AXA World Funds – Framlington UK. This is a Luxemburg SICAV, which we managed to launch immaculately just before the Brexit referendum in June 2016. Since then the Fund performance has been extremely strong, but clearly there was some turbulent times around the Brexit referendum, and we’ll come on and perhaps cover that a bit later on about the drivers behind those particular returns.

But let’s first of all have a look at the FTSE 250 as a whole. Because clearly that’s where your background is, that’s where you’ve been running the Fund the longest in the market. Tell us what you mean by this short-term voting machine, long-term weighing machine and how that relays into your thinking around the FTSE 250.

CHRIS ST JOHN: Yes, I think the FTSE 250 is a very good place to illustrate the power of compounding earnings growth. Very simply I think if you’re going to invest in equity, you need to make sure the management team are working for you as an equity holder, so balance sheet strength is important. But what really drives performance is the underlying earnings growth of the companies you’re investing in. Very simply if we can find assets that are producing £100 of free cashflow, just as an example, then we can hold them until they’re producing £1,000 of free cashflow. And provided the balance sheet is sufficiently strong to allow those benefits of growth to accrue to the equity holders, we should make absolute returns. And the FTSE 250 I think illustrates the power of compounding and growth very well.

This chart shows the long-run, 12-month forward P/E in red of the FTSE 250 index, excluding investment trusts, and the grey line shows the forward 12-month spots, forward 12-month P/E of the index in any moment in time. And if you look at the two arrows, if you go to the left arrow, this goes back to December 2001. And the year to that date, the economic output of the FTSE 250 index, the net income was £5.5bn. Now, roll the clock forward, net income to the end of October 2015 was £18.6bn. The economic output give or take has broadly trebled over that time period. Now the P/E, forward P/E – and many people look at this as a measure of valuation – was 18.9 in December 2001, and actually had moved down to 16.1 by the end of December 2015.

Now, huge amounts of volatility in the middle, I accept, and equities are volatile, but had you bought at the start, even though you paid a higher multiple for those earnings and just held through to October 2015, you’d have made very substantial returns.

ROB BAILEY: And when you look at stocks within the mid-250, how significant is the P/E ratio in your thought process?

CHRIS ST JOHN: Yes, it is important, but it’s one metric of valuation. I think the important thing with investing in any business is particularly, well any company, including those on the listed market, really is to stand back and look at the business and just make the assumption it’s not listed. You know, what are you getting out of the company by putting in a pound of capital? So free cashflow yield is important, it’s not an income fund, but dividends is important, special dividends are important, you know, the growth in the underlying earnings, the cash conversion of those underlying earnings. The idea being you can build up a picture of absolute return over say a three to five-year period in a particular investment case.

ROB BAILEY: And when you look back on this chart over the last 20-odd years, there’s clearly been some better buying times for the mid-cap space, if you like, but overall I think the next chart’s quite interesting, it’s showing you the spectacular returns you’ve had relative to the All Share and relative to the World Index as well.

CHRIS ST JOHN: Yes, I mean equities are volatile. If you’d have put all your money into the mid-cap index just before the global financial crisis, you’d have been feeling battered and bruised. Had you carried on holding it until not actually that long afterwards, you’d have been in a pretty good place. Because what has happened is this compounding earnings growth that’s really driven the returns. I think this chart’s very interesting because it shows the capital return of the FTSE 250 index in the purple line. That goes back to December 1999, broadly the peak of the market at that time. If you look at the return you’ve got on the capital and compare it to the MSCI World and the FTSE All Share it’s been pretty impressive. But when you overlay and include the dividends reinvested, you’ll see the total return is dramatically higher than the capital return.

Now, what hasn’t happened over this time period is a big reduction in dividend cover. I mean clearly it does ebb and flow. Neither have you seen a big gearing up of balance sheets whilst stock has been bought back in by these companies. So this compounding dividend return, this compounding capital has come from underlying earnings growth.

ROB BAILEY: And I guess when you’re looking at the return here, it’s 461% from the FTSE 250, and you compare that to the All Share, that’s quite a significant outperformance. That’s really a representation of the dynamism within the market as well.

CHRIS ST JOHN: Yes, absolutely, and it’s that dynamism I’d like to give unit holders exposure to in the mid-cap fund, and also the multi-cap AWF offshore fund as well.

ROB BAILEY: OK. Let’s talk a little bit about compounding. Because you’ve mentioned compounding, you’ve mentioned the compounding of dividends. You as an investor, explain to us how compounding really adds to your thought process and where it fits – because you’re not investing just for the next six months.

CHRIS ST JOHN: No, if compounding is going to work in your favour as an equity investor you need to be invested for a prolonged period of time. My investment horizon is three to five years. Ideally it’s 20, 30 years, but the world doesn’t always work out as you expect, things change. Management teams leave, competitors arrive on the scene, the cost of capital changes as well. So that leads to higher turnover in the fund than you would like. But a three- to five-year investment horizon in reflected in the turnover of the fund. And I think graph shows very well why investing in these long duration assets why the holding period is important. And this shows the S&P Global going back between 1993 to 2013, so a 20-year time horizon. And what this illustrates if you look at the one-year returns is that 40% of that comes from the change in multiple.

Now, the change in multiple comes from a whole host of things, but one of which and I would argue a very significant amount of that one-year return comes from capital flow: either more buyers or more sellers in an index or a stock which dictates that short-term capital return. The underlying fundamentals over a short-term time period rarely have enough time to assert themselves. The longer you hold an equity for, the more time those underlying fundaments have to negate the sort of distortion effect of buyers and sellers at the front end, and you’ll see over 10 years 72% of your return comes from turnover growth, i.e. the underlying fundamental growth in economic output of these businesses, and 1% comes from the movements in the multiple.

ROB BAILEY: And that thought process when you’re examining companies, when you’re meeting with company management, I guess you’ve got a close focus on things like cashflow and all the relevant metrics of evaluating a company. But for you the most important thing is can this company continue to grow their profits year after year after year.

CHRIS ST JOHN: Yes, sustainability is really important. That means companies have to invest. I’m much more interested in companies that are growing because their turnover is growing, the economic output is growing. Rather than businesses that are necessarily growing their profitability by just cutting costs and cutting investment, I just think that’s fundamentally flawed in terms of having a long-term investment horizon. The two just do not sit together.

ROB BAILEY: So we’ve experienced a degree of market volatility over the last month or so in February of this year, and that’s something that actually I think perhaps people have got a little bit almost complacent about. There’s been lots of people who’ve been talking about market corrections, but there’s been no real signs of volatility until recently. This next graph I think is quite interesting in terms of building on that conversation because this shows actually volatility is an intrinsic part of investing in equities.

CHRIS ST JOHN: Absolutely, volatility has been around for years, and it’ll be here to stay in all asset classes. But I think particularly in equities, if you think about the Insolvency Act, where equity holders sit on the preferred creditor list, we are at the bottom end. Now, fine, increased risk as a consequence, but the opportunity to make increased returns is there. But one thing you have to accept is a level of volatility as a consequence. Volatility gets exacerbated by a number of reasons. We’ve talked about companies that get caught out by a change in their own markets or cost of capital or whatever it may be. Capital flows also move markets, create volatility. And when you’re looking from a bottom-up company perspective, the capital structure as well does dictate and influence the level of volatility. So the higher the debt broadly as a percentage of your enterprise value will lead to a more volatile underlying equity.

ROB BAILEY: And so do you factor in the macroeconomic environment when looking at companies? How important is knowing what GDP expectations in the UK are, or how important is knowing what the dollar/sterling rates are going to be in your decision making process?

CHRIS ST JOHN: You have to be aware of these things, but the primary driver is the bottom-up fundamentals. Now if you get a significant move in currency that is going to affect the bottom-up fundamentals of certain businesses. If you’re importing goods, clearly your cost of goods sold in sterling terms is going to go up if sterling drops. And likewise overseas earnings will go up in sterling terms as a consequence. So it does influence markets. I’m more interested in the underlying fundament effects, so transactional effects on currencies interest me far more than translational. But companies, although we’re bottom-up stock pickers, they do operate in an economic environment. There are certain areas of the economy that are doing well. And this goes for global economics, not just UK, and there are certain areas that are challenged. And it’s up to us as stock pickers to focus on those areas that are least challenged and areas that are prospering, as opposed to tracker funds which will allocate capital purely on the basis of size and market capitalisation.

ROB BAILEY: So let’s just dig deeper into some of those macros factors. I’ve pulled a slide up here which shows the split of revenues in the FTSE 250. Now back in 2016 when sterling was sharply weaker, we saw a very strong run by the mega caps, the dollar earners, and the perception then very much was that the UK mid-cap is a UK, much more UK-centric index. Now clearly there is a higher percentage of revenues from the UK in the mid-250, but this graph here suggest it’s only about 50% of revenues actually come from the UK; the rest is from elsewhere.

CHRIS ST JOHN: Yes, I think it’s one of these misconceptions people have of the mid-cap index that it is a purely UK domestic economically focused market. And that’s simply not the case: 50% of the income, as this graph shows, comes from the UK economy, with the balance coming from overseas companies. There are many developed global businesses within the mid-cap space that are capitalising on very similar trends and thematics that larger companies are benefiting from.

ROB BAILEY: OK. Let’s move on and just perhaps talk a little bit more about the investment philosophy. Because we’ve recently been making a lot of noise about the way that our investment process globally is evolving to be much more thematic-led, if you like, and this slide here demonstrates some of the key themes that we’re looking at from a global basis. How does this impact your thinking?

CHRIS ST JOHN: Yes, the first thing I’d say is it’s not an exhaustive list and actually looking at thematics has been part of the investment philosophy and process from the outset. I mean it’s something I’ve looked at for the last 20 years. It is important because I think this highlights areas or at least helps question in terms of those areas of the global economy and which sectors and companies are likely to have an economic tailwind rather than a headwind. But there are many more on here. You think about emerging middle classes, which was talked about a lot 10/15 years ago, less so now. But the implications of that, the increased things like pet ownership, which might seem slightly esoteric, but mid-cap company Dechra Pharmaceuticals is capitalising on exactly that.

ROB BAILEY: So I guess these help you in your thinking of a 5-year, 10-year investment, rather than simply the shorter-term stuff that we were talking about earlier on.

CHRIS ST JOHN: Yes, absolutely, there are a huge amount of companies to invest out there, particularly when you look at the All Share. And so having a mechanism of just cutting the number of companies down in terms of the business I focus upon on is a good thing.

ROB BAILEY: Now, as we’ve emphasised, the Fund is very much a stock picking type fund, or the way that you manage is very much on a stock picking basis, but I want to just dig a bit more into these themes and ideas. And this slide here perhaps relates some of those investments to some of these things. And the one I want to pick up on here is On the Beach, which is a stock that you’ve been invested in for some time.

CHRIS ST JOHN: Yes, this chart shows a number of additional thematic drivers and investment sort of thesis over and above the top-down secular drivers we saw on the prior page. Service, service, service, that’s something very close to my heart: businesses where you’re getting an increasing transparency of prices, you know, which companies are offering high service levels that make a real difference to their customers, whether that’s corporate and individual. Another area, yes, changing consumer dynamics, you know, we have seen, go back to 1999/2000 a number of these business models are now emerging and creating cashflow, high margins, able to scale on low levels of capital as a result of broadly internationalisation of trade and the increase in internet penetration. And On the Beach is a very good example of that.

It’s a company that I suspect, I saw last night the advert for Benidorm and On the Beach were the headline sponsor for that. But this is a business which is an online business and online travel agent. It allows its customers to dynamically package their own holidays. More and more holidays are being booked online, so they benefit from that growth driver. They’re taking market share of the online market as well. And as their name becomes more pervasive, people are starting to either go direct to their website or search directly in the URL for, and that is actually allowing their margins to expand as well.

Also the market is changing. If you look at competitors in the UK, the company that springs to mind has a huge amount of branches still and a big physical footprint. As a consequence it has leases, and if you have shops and outlets, they’ve got to be staffed, you’ve got pay rates and you’ve got to pay rent. It just adds and adds more and more cost. So therefore the cost of delivery, the marginal cost of delivery for them is so much lower than the competition. And that frees up capital to invest more in their own systems. The systems that control the business, the systems they use to sell and promote are all internally generated. And it also frees up more capital effectively to market the company, therefore increase the recognition, increase the footfall, increase the usage and people booking direct, which pushes those margins up.

ROB BAILEY: OK. Let’s move on and have a look at the two funds we’ve been speaking about. We’ll start with the AXA Framlington UK Mid Cap, and we’ve got a question here relating to some of the statistics on this, particularly with regard to the weighting on industrials. You’ve got 38.6% of the portfolio in industrials, which is a relative overweight of 9.6% so a pretty chunky bit there. And the question is really around the risk, how do you associate the risk around an overweight like that in your portfolio?

CHRIS ST JOHN: Yes. Well risk is clearly vital in equity investing. We’re all trying to get a good, you know, it’s a risk-adjusted return that’s of real interest. What I don’t have is any maximum or minimum constraints in terms of sectors relative to the index because that’s not how I think about it. I’m aware of what’s in the index, but what I’m really interested in are the underlying profit drivers of the companies. So although a sector may, something like industrials, yes we are overweight, the actual profit drivers of the underlying businesses are very diverse, and particularly within support services, which is a sort of, it’s almost a catchall sector which has companies with many profit drivers in. So I don’t worry about the individual sector weightings, I’m more interested in the underlying profit drivers, as well as the size of the individual holdings that we take. I’m more worried about the stock specific risk. And to deal with that I have a maximum 4% stockholding size in any stock within the mid-cap fund. And likewise to deal with that I make sure there’s not too much concentration at the top of the Fund as well.

ROB BAILEY: And so we’ll talk about the individual stock weightings in a moment, but just looking at the weighting by market cap. You’ve got about 80% of the fund in FTSE 250. You’ve got 10% in small cap and AIM, which I’m guessing is your nursery. Why do you have a holding in the FTSE 100 as well? What’s the rationale behind that?

CHRIS ST JOHN: The rationale, originally this mandate was based on, I based this mandate on a mandate I’ve been running for several years before the launch of this, which really just mirrored the constraints on that fund because they’d worked very well for it. And those constraints are, it should be deemed as a core mid-cap fund. It has to have a minimum of 70% of the assets in the FTSE 250 index. Now I think we should expect that to be closer to 80% on an ongoing basis, particularly when you consider companies that might qualify for the index but haven’t quite got in there yet so an IPO for example. I can hold up to 15% in the FTSE 100. Now that wasn’t put in place with the intention of making direct investments in the FTSE 100, but it was put in place to make sure I’m not a forced seller of equities when they get promoted to the FTSE 100. Equity investing, again, when you’re looking to lower that risk, you want to make sure that you’re not a forced buyer or seller, and this helps take away that problem.

ROB BAILEY: And your new ideas that come from the small cap and AIM, clearly you do a lot of work with Dan Harlow in this space. You’ve got about half and half in small cap and AIM, where are you seeing the best new ideas?

CHRIS ST JOHN: It’s a variety of areas really. I think valuations certainly drop away as you go lower down the market cap scale. And certainly the multi-cap fund is a beneficiary of that. But new ideas crop up all the time. The IPO market is fairly buoyant with new companies coming onto AIM, onto the full list. M&A creates opportunity as well. Management change, industry change, there’s constant change, so as a consequence there is constant opportunity as well.

ROB BAILEY: And going back to look at the performance here, just looking at this graph as it stands. On the right-hand side the one, three and five year numbers are the cumulative years. On the left-hand side of those blocks on the bottom are the actual annualised numbers. This does demonstrate again the consistency that the mid-cap has outperformed over the last six/seven years. More particularly how your Fund’s outperformed that, is that purely down to the stock picking side do you think?

CHRIS ST JOHN: It is. If you look at the attribution analysis of the returns, then the vast majority has come from stock picking. So yes if you do the analysis, it has come from stock picking. And I think this is an area of the market, it’s very, you know, these dynamic growing compounding companies are a great place to invest, and there is an overrepresentation of businesses like that in the FTSE 250 space. But I think because these companies are slightly smaller because they are less well researched because we have very good relationships with the people running these businesses, there’s an opportunity to generate returns over and above the index returns. And I think you’ll see from the slide that the year-on-year outperformance has been very consistent.

ROB BAILEY: OK. And I want to get on and talk about the offshore all companies fund shortly, but just quickly on the top 20 holdings within the fund here. It’s a pretty flat portfolio. That’s by design, I presume?

CHRIS ST JOHN: Yes, it is. I think rather than flat I’d say what I don’t want to do is take particular stock specific risk at the top end of the Fund. I don’t want performance of the Fund to be driven by three or four stocks with a long tail; I want these companies to all make a contribution. And if a company goes spectacularly wrong, or if a mistake is made, or a market changes and shares fall, and that does happen, that will continue to happen, then I want to make sure it doesn’t destroy the integrity and the overall performance of the Fund.

ROB BAILEY: And we’ve had another question here about your largest holding in that top 20: RPC. Clearly a plastics group and plastics has been in the news a lot over the last couple of months, still your largest holding in the portfolio, what’s your thinking behind that?

CHRIS ST JOHN: Yes, I mean this has been a very good company to invest in over the years. It’s had some trouble recently in terms of share price performance. I think it’s principally down to two reasons. The first is the effects that the acquisitions this company has made on the profitability and the cashflows of the business. It has made, you know, the business model under the current management team was so consolidate the industry that they operate in. They’ve made a number of acquisitions, or acceleration in the number of acquisitions. And as a consequence of that, and it’s perfectly normal, you do get an increase in the exceptional costs going through the profit and loss account. Unfortunately what it does do is it does muddy the water in terms of what the underlying returns are of the business, and inevitably the cashflow conversion gets affected in that scenario.

Now, the management have altered their business model at least in the short term and the acquisitions have fallen away, and I think what we’ll get going forwards now is a demonstration of the cashflows and the underlying organic growth. Underlying organic growth will not be monumental. And the second area is the plastics. Now this has been thrust very much into the spotlight recently and that has affected sentiment towards this company. I would make a couple of points. One that everything they produce can be recycled. They use, I think it’s about 10% of the plastics they produce are made from recycled plastics. One-use plastic straws, one-use cups, that is not something that they produce. So they are getting caught up in the crossfire at the moment.

It is interesting to note that actually in terms of plastic deposits into the sea – and this is clearly something that the company does not want to occur – 2% comes from the Europe and US combined. So actually the pollution from the countries that they operate in, or the predominance of their operation, is very low.

ROB BAILEY: It demonstrates I guess a macro theme that can intervene in the stocks you invest in.

CHRIS ST JOHN: Absolutely, yes, I mean it’s up to management to prove their case from a fundamental perspective. And I think what we need to see is increased recycling rates and individuals being incentivised to do that. You’ve seen it in Germany: it’s been very effective with plastic bottles. You’ve certainly seen the effect of plastic bag usage in the UK dropping dramatically. And we need to see more of that. And more innovation from the plastics companies as well. This company has now produced a non-petrochemical plastic which is fully compostable, i.e. you put it in your compost heap and within a few weeks it has completely rotted down.

ROB BAILEY: OK. Well let’s move on and talk about the AXA World Funds – Framlington UK. Now this is a Luxemburg domiciled Fund. It’s available on most fund platforms in the UK. And this is a multi-cap Fund. Naturally FTSE 250 is a reasonably large representation, about 37.2%, but you’ve got about 30% in the FTSE 100, with the remainder invested in smaller caps. Explain to me briefly your philosophy behind this Fund.

CHRIS ST JOHN: Well this fund is really to give you exactly the same investment philosophy and process as the mid-cap fund, but having exposure to the entire UK All Share – and when I say the entire UK All Share, a proper spread of businesses throughout market capitalisation. So when the Fund was launched we said roughly a third of the fund will remain in the FTSE 100 and about the same in mid-cap and small cap. And that has been the case from the outset. As you see we are pretty much bang on 30% in the FTSE 100, 40%-ish in the FTSE 250, with the balance elsewhere.

ROB BAILEY: And looking at this Fund, as I mentioned earlier on, we launched this into the teeth of the Brexit campaign. Clearly there was a lot of extraneous shocks around the market around that time. What were the key drivers to the short-term underperformance that you had around June 2016?

CHRIS ST JOHN: Yes, there are certain biases within this Fund. Having 30% in the FTSE 100, if you compare it to the All Share, which is about 80% FTSE 100, this Fund is 50% underweight FTSE 100, and particularly underexposed to the top 10/15 companies within the All Share. So as a consequence, it is relatively underweight in sectors such as oils, banks…

ROB BAILEY: All the stocks that did really well around that time.

CHRIS ST JOHN: All the companies that benefited at that time. And those companies benefited particularly from the fall in sterling as well as a change in sentiment. So those companies were seeing on the day of Brexit 7-8% earnings upgrades as a consequence of the fall in sterling; whereas I think from a sentiment perspective everything in the mid-cap, everything really that was UK domiciled was sold off – very dramatically in some cases.

ROB BAILEY: And I guess that comes back and reinforces the point you were making earlier on in terms of where your long-term percentage returns come from, where your short-term returns come from, multiple expansion, all those extraneous currency-type…

CHRIS ST JOHN: Yes, I think what we’ve seen since then, I mean the economy has not turned out, you know, the economic performance of the UK has been nowhere near the level of reduction relative to the doomsayers. The economy has kept on growing. But what has been allowed to happen over the time period since Brexit is, I think, as you’re alluding to, the underlying fundamentals of the businesses that we’ve invested in have had a chance to reassert themselves and the equities have gone up as a consequence.

ROB BAILEY: And very briefly looking at your top 20 holdings here, this again looks like a reasonably flat portfolio, certainly don’t have the exposure to the mega caps in line with the index.

CHRIS ST JOHN: No, we’re very much, you know, we are underweight mega caps. It’s important I think if companies go into this Fund that there is a reason for them being there. And the mega caps that we’ve invested in have been good returners for the Fund. But I just think it’s important in investing, particularly, well any investment, is to look at the absolute return you think you’re going to get and the absolute risk. And putting significant amounts of the assets into very few businesses, which is effectively the FTSE All Share, I just don’t think is a low risk way of investing. Now, if you look at the Fund, this is an absolute, if you look at the Fund relative to the stock level, the top 10 relative overweights to the Fund look absolutely nothing like the All Share, so I’m cognisant of what is in there, but it is not the driver of the decisions to hold these companies.

ROB BAILEY: Brilliant. Chris St John, thank you very much for that. And thank you for watching. I hope you found today’s webcast useful and we look forward to seeing you on our next broadcast.

KEY RISKS – AXA Framlington UK Mid Cap Fund

The risk category is calculated using historical performance data and may not be a reliable indicator of the Fund's future risk profile. The risk category shown is not guaranteed and may shift over time. The lowest category does not mean risk free. Why is this Fund in this category? The capital of the Fund is not guaranteed. The Fund is invested in financial markets and uses techniques and instruments which are subject to some level of variation which may result in gains or
Additional Risks
Liquidity Risk: some investments may trade infrequently and in small volumes. As a result the Fund manager may not be able to sell at a preferred time or volume or at a price close to the last quoted valuation. The Fund manager may be forced to sell a number of such investments as a result of a large redemption of units in the Fund. Depending on market conditions, this could lead to a significant drop
in the Fund's value and in extreme circumstances lead the Fund to be unable to meet its redemptions.
Further explanation of the risks associated with an investment in this Fund can be found in the prospectus.

KEY RISKS – AXA World Funds – Framlington

The risk category is calculated using historical performance data and may not be a reliable indicator of the Sub-Fund's future risk profile. The risk category shown is not guaranteed and may shift over time. The lowest category does not mean risk free. Why is this Sub-Fund in this category? The capital of the Sub-Fund is not guaranteed. The Sub-Fund is invested in financial markets and uses techniques and instruments which are subject to some levels of variation, which may result in gains or losses.
Additional Risks
Credit Risk: Risk that issuers of debt securities held in the Sub-Fund may default on their obligations or have their credit rating downgraded, resulting in a decrease in the Net Asset Value.
Counterparty Risk: Risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default.

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Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.
The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.
AXA World Funds – Framlington UK is a sub-fund of AXA World Funds. AXA WORLD FUNDS ‘s registered office is 49, avenue J.F Kennedy L-1885 Luxembourg. The Company is registered under the number B. 63.116 at the “Registre de Commerce et des Sociétés” The Company is a Luxembourg SICAV UCITS IV approved by the CSSF and managed by AXA Funds Management, a société anonyme organized under the laws of Luxembourg with the Luxembourg Register Number B 32 223RC, and whose registered office is located at 49, Avenue J.F. Kennedy L-1885 Luxembourg.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
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