BY MIKE WILLANS, HEAD OF INTERNATIONAL EQUITIES
The CF Canlife Global Equity Fund maintained its value focus in July, with overweights in sectors such as financials, materials and industrials. This is in stark contrast to earlier this year, when we were much more defensive. However, we believe that consensus views are now too bearish and that a modest rise in yields through until year-end will support value sectors and stocks. In contrast, it should put some pressure on the expensive multiples we are seeing in growth areas, particularly in the US.
Although this positioning did not bear fruit in July, we maintain a very high conviction, particularly given the glimmers of value outperformance that we have seen. For example, growth behemoths such as Amazon and Alphabet have paused for breath recently, highlighting their potentially stretched valuations. It was, however, a very low turnover month for the Fund. Our holding in health and well-being news provider WebMD was taken out at a 20% premium, which helped performance, whilst we also sold our position in Bristol Myers Squibb. This was because we felt that, following the news of AstraZeneca’s drug trial miss and associated 15% share price fall, there was downside risk of Bristol Myers Squibb’s similar trial ending the same way. We did, however, add a small position in AstraZeneca as we are more positive on upcoming results and believe it is a potential takeover candidate.
From a regional perspective, Europe maintains our favoured region, supported by a continuation in economic growth and falling unemployment. To take advantage of this improving outlook, we have positions in European banks – such as Credit Suisse and UBS – which are more geared into economic recovery and fit with the Fund’s more value positioning.
Looking forward, despite a number of economic and political uncertainties, global economic growth remains robust and we have seen markedly less dovish tones emanate from central banks in recent weeks. This leads us to think that we have moved on from a world of ‘just’ low bond yields, which should disproportionately benefit the more value, beaten-up areas of the market. Therefore, we expect the second half of 2017 to play out much as 2016 did and believe that investors should be looking closely at value-focused funds in this environment.
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. Currency fluctuations can also affect performance. The contents of this article are not intended as investment advice.
The information contained in this document is provided for use by institutional investors, professional investors and professional advisers and is not for onward distribution to, or to be relied upon by, private 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 are subject to change at any time without notice. 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.
CLI00873 Expiry on 15 November 2017