CF Canlife UK Equity Income Fund Update

snap election impact

BY CRAIG RIPPE, HEAD OF UK EQUITIES

ECONOMIC & MARKET OVERVIEW

Politics hit the headlines once again in April, with UK Prime Minister Theresa May calling a snap election for 8 June.

May’s Conservative Party has been miles ahead in polling for some time – with a comfortable lead over a Labour Party viewed by many as in disarray under the leadership of Jeremy Corbyn. Should the Conservatives win comfortably, as current polling suggests, the stronger mandate may be helpful through the two-year Brexit negotiations with European leaders.

The snap election announcement resulted in a strong spike for sterling, with the pound rising to a six-month high against the US dollar. The rise for sterling had an impact on the large number of UK-listed stocks with strong dollar-based earnings, dragging the large-cap index lower during April. The mid-cap area of the market was more resilient, hitting a new all-time high over the period.

At economic level, UK GDP growth came in at 0.3% for the first quarter, far below the Monetary Policy Committee’s 0.6% target. Retail sales declined by 1.4% quarter-on-quarter, as higher inflation impacted on consumer spending. With consumption a large percentage of the UK economy, the slowdown is concerning. The FTSE All-Share Index posted a slightly negative return, as did the CF Canlife UK Equity Income Fund, although we were ahead of the benchmark.

Portfolio activity

Late in April we participated in the IPO of trucking group Eddie Stobart Logistics PLC, which listed on the Alternative Investments Market. The IPO, which came three years after it was spun-off from the larger Stobart Group in 2014, valued Eddie Stobart at more than £570m. We also trimmed our holding in Centrica, as energy supply companies continued to be impacted by political rhetoric.

Equities continue to be an attractive destination for investors, particularly relative to bonds. In terms of valuation, the UK has the highest dividend yield of any developed market and remains relatively defensive. Whilst the Fund is sitting on slightly higher cash levels than usual, we remain cautiously optimistic of the prospects for UK equities for the remainder of 2017.

The value of investments may fall as well as rise and investors may not get back the amount invested.

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.

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.

CLI00785 Expiry on 22 August 2017

 

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