BY DAVID MARCHANT, MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER
The LF Canlife Portfolio Funds enjoyed strong relative performance in March as our conservative stance started to be well-rewarded. The exuberance that we have been witnessing across various parts of the market showed some signs of starting to unwind, particularly in the US technology sector. Stocks such as Facebook, Amazon and Google all fell more than 10% in the second half of March as data protection issues, the threat of regulation and – in Amazon’s case – the ire of President Trump all took their toll.
The UK equity market was also weak, although the Portfolio Funds benefited from strong stockpicking in both growth and income stocks. In particular, we continued to benefit from the Melrose bid for GKN, whilst US-based CME Group announced a bid for Nex Group – formerly known as iCAP – which sent shares surging higher. We also saw gains from our property exposure, which continues to provide ballast to the portfolios. Sentiment is improving and we believe the asset class continues to be an important diversifier for the funds, as well as a source of yield.
Within fixed income, UK gilts were the best performers, which was unsurprising given the general ‘flight to quality’ that we witnessed in March. Therefore, our lower risk Portfolio Funds were significant beneficiaries due to their higher gilt exposure, although corporate bonds also delivered a positive return for the period.
Looking forward, a number of recent surveys have suggested that many view the UK market as one of the least attractive globally. However, the UK has been remarkably resilient and it often pays to take a contrarian stance in these situations. We continue to believe that growth will surprise on the upside this year and any rate rises will be gradual and contained. Elsewhere, the US continues to grow strongly, but could risk overheating if the current trend is maintained. What seems to be an impending trade war with China is also a potential risk to the global economy although we believe sensible heads will prevail, given it will inevitably be a negative outcome for both sides.
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. The funds may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the funds. 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.
CLI01151 Expiry on 15 July 2018