Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

Energy is a lightly held sector, a bit part player in a world dominated by Tech, Financials and the EM Consumer.  The average holding weight among the active EM funds in our analysis stands at just 3.81%, underweight the benchmark by -2.11% on average.The fact that nearly a quarter of active EM managers have no exposure to the Energy sector is perhaps the most telling statistic of just how under-owned the sector is.  Part of that reason, we believe, lies in the risk of not holding Energy when index weights are so low. With Oil prices at multi-year highs, the Energy sector has started to outperform in a big way, with EM Energy outperforming the broader MSCI EM index by over 30% over the last 12 months.  With just 22.7% of funds overweight the benchmark, active EM managers are feeling the pinch.  The risk of being underweight or avoiding the sector completely has moved significantly higher.One of the factors that has driven Energy to the margins of EM investment is the rise of secular growth opportunities in Technology, Consumer Discretionary and Communication Services.  Indeed, the current investor base in Energy is heavily skewed towards the Value and Yield end of the spectrum.  Instead, Aggressive Growth managers have rotated towards the secular growth opportunities within Packaged Software, Internet Retail, Biotechnology and Internet Software/Services.Can the lure of a cyclical growth opportunity such as Energy be enough to win back investment from Growth investors?  If Energy keeps outperforming it will undoubtedly push Growth investors to look for opportunities within the sector.  We identify 2 stocks that already have an investor base among both Aggressive Growth and Growth funds, whilst also appealing to Value investors.  As such, we would expect both to be on the shortlist of the many underweights and non-investors looking to ramp up allocations in the Energy sector as we shift to a new ownership regime.Analysis taken from our EM research, covering 247 active GEM funds with combined AUM of $500bn

Energy is a lightly held sector, a bit part player in a world dominated by Tech, Financials and the EM Consumer.  The average holding weight among the active EM funds in our analysis stands at just 3.81%, underweight the benchmark by -2.11% on average.The fact that nearly a quarter of active EM managers have no exposure to the Energy sector is perhaps the most telling statistic of just how under-owned the sector is.  Part of that reason, we believe, lies in the risk of not holding Energy when index weights are so low. With Oil prices at multi-year highs, the Energy sector has started to outperform in a big way, with EM Energy outperforming the broader MSCI EM index by over 30% over the last 12 months.  With just 22.7% of funds overweight the benchmark, active EM managers are feeling the pinch.  The risk of being underweight or avoiding the sector completely has moved significantly higher.One of the factors that has driven Energy to the margins of EM investment is the rise of secular growth opportunities in Technology, Consumer Discretionary and Communication Services.  Indeed, the current investor base in Energy is heavily skewed towards the Value and Yield end of the spectrum.  Instead, Aggressive Growth managers have rotated towards the secular growth opportunities within Packaged Software, Internet Retail, Biotechnology and Internet Software/Services.Can the lure of a cyclical growth opportunity such as Energy be enough to win back investment from Growth investors?  If Energy keeps outperforming it will undoubtedly push Growth investors to look for opportunities within the sector.  We identify 2 stocks that already have an investor base among both Aggressive Growth and Growth funds, whilst also appealing to Value investors.  As such, we would expect both to be on the shortlist of the many underweights and non-investors looking to ramp up allocations in the Energy sector as we shift to a new ownership regime.Analysis taken from our EM research, covering 247 active GEM funds with combined AUM of $500bn

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

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<ul><li>GAIL: Our BUY recommendation on GAIL with a target price of INR 137 is based on (1) an increase in gas transmission volume to 127mmscmd by FY25 on the back of an increase in domestic gas production, (2) completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment</li><li>Q1FY24 reported EBITDA/PAT at INR 24/14bn, came in below our estimates, impacted by weak earnings from the LPG and Liquid Hydro Carbon (LHC) segment</li><li>However, sharp pick-up in natural gas transmission volumes, higher tariff and higher gas marketing volumes supported earnings</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

GAIL: Our BUY recommendation on GAIL with a target price of INR 137 is based on (1) an increase in gas transmission volume to 127mmscmd by FY25 on the back of an increase in domestic gas production, (2) completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segmentQ1FY24 reported EBITDA/PAT at INR 24/14bn, came in below our estimates, impacted by weak earnings from the LPG and Liquid Hydro Carbon (LHC) segmentHowever, sharp pick-up in natural gas transmission volumes, higher tariff and higher gas marketing volumes supported earningsContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: GAIL, Oberoi Realty, Petronet LNG, Navin Fluorine International

HSIE Results Daily: GAIL, Oberoi Realty, Petronet LNG

<ul><li>Titan: While Titan continued to clock healthy revenue growth of INR 103.6bn (up 33%; 4-year CAGR: 21%; HSIE: INR 98.8bn), the margin fell short of expectations</li><li>Jewellery sales (ex-bullion; standalone) grew 23.5% (4-year CAGR: 18.4%) in Q4FY23 as both the number of buyers and ticket sizes aided growth</li><li>Non-jewellery growth of 31% YoY (4-year CAGR: 13%) remained healthy too (in-line)</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Titan: While Titan continued to clock healthy revenue growth of INR 103.6bn (up 33%; 4-year CAGR: 21%; HSIE: INR 98.8bn), the margin fell short of expectationsJewellery sales (ex-bullion; standalone) grew 23.5% (4-year CAGR: 18.4%) in Q4FY23 as both the number of buyers and ticket sizes aided growthNon-jewellery growth of 31% YoY (4-year CAGR: 13%) remained healthy too (in-line)Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Titan, Havells India, Godrej Properties, Petronet LNG, CDSL, Orient Cement

<ul><li>We expect our coverage universe EBITDA to increase by +2% YoY, +10% QoQ, owing to an improvement in profitability from the downstream segment due to higher demand for petroleum products, higher refining throughput and GRMs</li><li>Upstream segment earnings are impacted by ~18/8% YoY/QoQ decline in crude oil prices and lower production, despite a YoY increase in domestic APM gas realisations</li><li>We expect lower gas volumes for City Gas Distribution (CGD) companies, owing to high retail CNG prices and spot LNG prices.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We expect our coverage universe EBITDA to increase by +2% YoY, +10% QoQ, owing to an improvement in profitability from the downstream segment due to higher demand for petroleum products, higher refining throughput and GRMsUpstream segment earnings are impacted by ~18/8% YoY/QoQ decline in crude oil prices and lower production, despite a YoY increase in domestic APM gas realisationsWe expect lower gas volumes for City Gas Distribution (CGD) companies, owing to high retail CNG prices and spot LNG prices.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Oil and Gas: Improvement for downstream segment

India

Petronet LNG Ltd. was formed by the Government of India to import liquefied natural gas (LNG) into the country. The Company is a joint venture between GAIL, ONGC, IOC and BPCL. Petronet LNG has also selected GAZ de France as a strategic partner. The Company has set up LNG receiving ports in Dahej (Gujarat) and Kochi (Kerala).

Petronet LNG (PLNG IN)

EM Energy: Regime Shift

A quarter of active EM managers have no exposure to the Energy sector and only 23% are overweight. With Oil prices at multi-year highs, active EM...

Steven Holden

HSIE Results Daily: GAIL, Oberoi Realty, Petronet LNG, Navin Fluorine International

Q1FY24 reported EBITDA/PAT at INR 24/14bn, came in below our estimates, impacted by weak earnings from the LPG and Liquid Hydro Carbon (LHC) segment

HDFC Securities

HSIE Results Daily: GAIL, Oberoi Realty, Petronet LNG

Q1FY24 reported EBITDA/PAT at INR 24/14bn, came in below our estimates, impacted by weak earnings from the LPG and Liquid Hydro Carbon (LHC) segment

HDFC Securities

HSIE Results Daily: Titan, Havells India, Godrej Properties, Petronet LNG, CDSL, Orient Cement

Titan: While Titan continued to clock healthy revenue growth of INR 103.6bn (up 33%; 4-year CAGR: 21%; HSIE: INR 98.8bn), the margin fell short of...

HDFC Securities

Oil and Gas: Improvement for downstream segment

We expect our coverage universe EBITDA to increase by +2% YoY, +10% QoQ, owing to an improvement in profitability from the downstream segment due...

HDFC Securities