BY DAVID ARNAUD, SENIOR FUND MANAGER & KSHITIJ SINHA, FUND MANAGER
Risk assets performed poorly in March, as investors preferred traditional ‘safe havens’ such as government bonds. In particular Eurozone corporate bonds underperformed, due to concerns over whether future growth would be downgraded. Following a rapid acceleration in economic indicators – such as Gross Domestic Product (GDP) growth and Purchasing Managers’ indices (PMIs) – in 2017, they have come off their highs this year. However, they remain strongly in expansionary territory and we believe the fundamental underlying global recovery is sound.
Nonetheless, the Fund’s overweight in corporate bonds contributed to its underperformance in March as government bonds, led by UK gilts and European peripherals, were the best performers. Indeed, all government bonds delivered a positive return during the month. The strength of sterling also contributed to relative underperformance, as the currency strengthened against the US dollar, Japanese yen and the euro.
Looking forward, we believe the global economic recovery is continuing, with recent market falls driven more by negative sentiment than an actual deterioration in business conditions. Therefore, we remain confident in the Fund’s positioning and its overweight in corporate bonds, as economic indicators have stabilised following a period of rapid acceleration. However, we are mindful of recent market moves and are monitoring the situation closely, with a view to moving more defensive if necessary.
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.
CLI01176 Expiry on 15 July 2018