BY NIGEL KENNETT, SENIOR FUND MANAGER
Major asset classes, including UK equities, saw a modest sell-off in February, as stronger growth and higher-than-expected inflationary data in the US spooked investors. This was because, combined with the withdrawal of monetary easing, many now believe that interest rates will rise faster than previously thought, undermining the short-term attractiveness of equities in particular.
However, it was an exceptionally quiet month in terms of portfolio activity, as the LF Canlife UK Equity Fund remained focused on its favoured structural growth themes. The only significant change was the addition of SSE to the portfolio in the utilities sector. This was funded by reducing our exposure to our existing utilities holdings. SSE is currently trading at a price-to-earnings (P/E) ratio of just 10x, with a prospective dividend yield north of 7%. We believe much of the bad news surrounding the stock is priced in. Good news should be on the horizon too, with SSE having struck a recent agreement with Thames Water to open up its Victorian-era tunnels to telecoms lines, a development which could allow it to surpass BT and offer better services to clients.
Elsewhere in the portfolio we added some exposure at the margin to Burford Capital and RELX. Burford Capital is a unique business in our opinion and we are continuing to use bouts of market weakness to top-up our exposure. Following the sell-off, we also believe that RELX’s combination of a quality company trading at a more attractive valuation was a good opportunity to up our exposure.
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.
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.
CLI01128 Expiry on 15 June 2018