BY DAVID ARNAUD, SENIOR FUND MANAGER & KSHITIJ SINHA, FUND MANAGER
Volatility returned to financial markets in February as higher-than-expected inflationary data and central banks reaffirming their intention to proceed with gradual rate hikes prompted investors to reduce their allocation to fixed income. This translated into bond yields spiking higher and equity markets selling off, despite the strong global growth backdrop. As expected, investment grade credit underperformed government bonds in this environment, although fixed income substantially outperformed equities from an asset class perspective, despite the higher bond yields.
However, it is important to remember that the global growth dynamic remains exceptionally strong, despite the sell-off witnessed in February. In the US, the Chicago Purchasing Managers’ Index reading came in slightly below expectations but was still 61.9, a level last seen in August 2014. Inflation in the Eurozone also matched consensus forecasts at 1.2%, highlighting that slack is still left to be picked up in the economy. In the UK, Brexit once again dominated headlines, with difficult choices facing Prime Minister Theresa May, particularly concerning the border issue between Northern Ireland and the Republic of Ireland.
Performance-wise, the Fund was able to add significant value via its currency allocation in February. The Japanese yen was up strongly against the Canadian dollar, whilst the US and the Euro also saw moderate gains. This was a boost to the Fund, as the majority of its assets are held in these three currencies.
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. Currency fluctuations can also affect performance.
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. These views 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.
CLI01129 Expiry on 15 June 2018