BY MIKE WILLANS, HEAD OF INTERNATIONAL EQUITIES
Global markets were patchy in April, as investors digested a number of market events. This included the announcement of a snap General Election in the UK, the first round of the French Presidential run-off and a fall in consumer confidence in the US.
Since the end of 2016, the CF Canlife Global Equity Fund has adopted a more defensive stance, which proved positive for relative performance during the month. Although we were aggressively positioned through the latter half of 2016 – with a significant overweight in banks for example – we believe the reflation trade is now over and that global momentum is slowing. Therefore, we further added to the Fund’s defensive exposure, increasing our weighting to consumer staples, healthcare and telecommunications stocks in particular.
This aided relative performance, as we ended the month just over 1% ahead of the benchmark. Some of the top contributors included Spanish pharmaceutical Grifols, Edwards Life Sciences and Dufry, a Swiss travel retailer. Indeed, our overweight position in Europe was beneficial during the month. We believe political risk receded following Emmanuel Macron’s first round poll victory, which removed an element of negative sentiment from the market. With the economy growing strongly – the Eurozone Purchasing Manager’s Index (PMI) recently hit a fresh high of 56.4 – and attractive valuations, we are finding a number of exciting opportunities across the continent.
Looking forward, the portfolio remains significantly underweight the more cyclical sectors, such as financials and industrials. We maintain a pragmatic style and as these sectors generated significant alpha for us in 2016, the risks are now to the downside and we have greater conviction in other areas. The consumer staples sector is now the biggest overweight, where we believe companies such as Edgewell Personal Care, one of the world’s leading manufacturers of shavers, are well-placed to navigate a choppy market. In the US, rhetoric surrounding the healthcare sector in general is slightly overblown in our opinion.
The value of investments may fall as well as rise and investors may not get back the amount invested.
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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.
CLI00776 Expiry on 22 August 2017