BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
Despite newsflow from central banks suggesting that UK interest rates may rise sooner than the market expects, an escalation in the North Korean situation and the continuing uncertainties surrounding Brexit, September was a relatively quiet month in terms of market movements. Looking at the central banks first, the Bank of England’s (BoE) Monetary Policy Committee (MPC) suggested that some withdrawal of monetary stimulus is likely in the coming months.
We do believe that yields will drift higher this year, but would caution that the BoE made similar comments in 2013, 2014 and 2015. However, given that UK Gross Domestic Product (GDP) growth since Brexit has been stronger than expected, rates returning to 0.50% is certainly warranted. This more hawkish sentiment has caused 10 year UK gilt yields to move sharply up to nearly 1.4% of late, which highlights the risk of investing in long duration assets. The CF Canlife Managed 0%-35% Fund maintains a short duration positioning, which helped it deliver top quartile returns during the month of September.
In addition, our UK equity income holdings helped us outperform the broad UK equity market, which was marginally down as concerns mounted around the UK’s ability to negotiate a successful Brexit, whilst sterling’s strength also hampered the large-cap international earners. However, our stockpicking proved fruitful, with the CF Canlife UK Equity Income Fund delivering a strong return.
Looking forward, the global economy continues to grow despite the best efforts of politicians to derail it, which is demonstrated by growth remaining robust across the UK, US and Europe. We believe this will be supportive of equities over fixed income, which is why the Fund maintains a short duration positioning within its fixed income holdings. The uncertain geopolitical outlook also highlights the strength of other asset classes, such as commercial property. Our exposure here provides stability and an attractive yield through our diversified portfolio of assets.
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.
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. The fund may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the fund. The value of the property is based on the opinion of a valuer and is therefore subjective.
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.
CLI00952 Expiry 15 January 2018