CF Canlife UK Equity Fund

overcoming the wall of worry

BY NIGEL KENNETT, SENIOR FUND MANAGER

UK equities were volatile in June as investors grappled to come to terms with the shock general election result, which saw Theresa May’s Conservative Party lose their overall majority in the House of Commons. However, in the immediate aftermath of the vote, equities were largely unmoved, as the market took the result in its stride. We believe this is a very healthy sign for the FTSE, which is now close to record highs having been able to consistently overcome negative newsflow.

There appears to be a new political attitude brewing in the UK, characterised by a backlash against austerity and a focus on wealth re-distribution. Given this ‘new normal’ we trimmed the CF Canlife UK Equity Fund’s holdings in three water utility companies prior to the election, given the political risk surrounding nationalisation. We also locked in some profits by trimming some of our top performers, including Bellway, Marshalls and SSP, recycling these profits into more ‘value’ positions as bond yields rose quite sharply during the month.

This included adding to our holding in Barclays, which should benefit from higher interest rates. In addition, the company is trading on a supportive price-to-book valuation of 0.7x. We also added to Glencore, which is also trading on an attractive valuation and should profit from the stabilisation in dollar commodity prices. These were more tactical additions in what is proving to be an uncertain investment environment, however we did also add to our favoured defensive growth areas, including Assura – the GP surgery owner – and British American Tobacco.

Looking forward, the FTSE 100 is currently yielding an attractive 4.1%, which we believe is more than adequate compensation for long-term investors, who are willing to be patient through a potentially uncertain period. However, as mentioned above, we do expect more tactical positions in the short-term and that a prudently diversified portfolio will be well-positioned to outperform

 

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 content of this article is 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.

Source: FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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.

CLI00846 Expiry on 15 October 2017

 

 

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