BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
Following a month in which investors were focused on the UK General Election and the potential ramifications of different results, July was a much more muted month domestically. UK equities were up just over 1% for the month, which was particularly positive given the near-relentless poor economic newsflow. Most recently, the International Monetary Fund (IMF) cut the UK’s growth forecast to 1.7% for 2017, after a weak start to the year. This combined with continued political uncertainty highlights the resilience of the market, which we expect to continue, albeit without much further upside. We favour UK equity income as an asset class, with an attractive dividend yield compensating us for the political risk in the market.
It was a more muted month in the fixed income world, but bond markets continued to grind higher – as yields remained relatively stable – and corporates once again outperformed government bonds. The CF Canlife Corporate Bond Fund performed strongly in this environment, and we remain positive on the prospects for corporate credit. Credit spreads are not cheap, nor are they overly expensive from an historical perspective. However, we are positioned at the shorter end of the yield curve, as we expect yields to rise modestly towards year-end.
In the commercial property world, we are seeing broadly positive rental growth across the general market but some secondary locations are starting to struggle. Therefore, although we are unlikely to see the same capital appreciation we have witnessed from the property market in recent years, we are still able to source yields of 5% per annum plus. This income stream is a very handy source of yield at a time of potential volatility and we believe there are still opportunities that we can benefit from as active managers, adding value through selective disposals, refurbishment and effective management.
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 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. 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.
CLI00871 Expiry 15 November 2017