BY DAVID ARNAUD, SENIOR FUND MANAGER
& KSHITIJ SINHA, FUND MANAGER
A difficult month for fixed income assets saw corporate bonds once again outperform their government counterparts although, overall, it was high yield bonds that ended September with the best return. This was down to yields moving higher across the developed markets, led by UK gilts. More hawkish comments from Bank of England (BoE) Governor Mark Carney suggested that there would soon be some withdrawal of monetary stimulus to counteract the rapid depreciation of sterling and return to more normal monetary conditions. This pushed 10 year UK gilt yields higher, and the market is now pricing in an 80% chance of an interest rate hike in November.
In the US, tax reform is now back on the agenda, following the failure of the Trump administration to get their healthcare policies passed. This saw treasuries sell-off as tax reform would likely lead to higher economic growth. In addition, President Trump met with potential successors to Janet Yellen – whose term expires in January 2018 – some of whom have already indicated their support for further rate rises.
However, despite this, global economic growth continues to support the outlook for the corporate bond market. Purchasing Manager’s Index (PMI) data remains robust worldwide and economies are overcoming political obstacles, such as the recent round of general elections in Europe. Therefore, we have made no thematic changes to the Fund, which performed strongly relative to benchmark in September thanks to its bias towards corporate bonds. In addition, the oil price was up 9% during September, which benefited our overweight in the energy sector.
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance.
The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com.
Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
CLI00953 Expiry on 15 January 2018