BY NIGEL KENNETT, SENIOR FUND MANAGER
Risk assets, including equities, continued to perform poorly in March as investors instead preferred traditional safe haven investments such as cash and government bonds. We believe that the current fall in asset prices is a correction, not a fully-fledged bear market, with the underlying fundamentals remaining robust. The LF Canlife UK Equity Fund performed strongly in this environment, delivering a positive return despite the fall in the broad UK equity market.
In particular, the Fund benefited from its exposure to UK merger and acquisition (M&A) activity. Both Melrose and GKN continued to perform strongly and US-based CME Group announced a bid for Nex Group – formerly known as ICAP – which sent shares surging higher. Elsewhere, Shire’s share price picked up following the announcement that Japanese group Takeda is mulling a bid, whilst we also saw litigation financier Burford Capital enjoy a very strong month having delivered consensus-beating numbers.
In terms of portfolio activity, we trimmed some of our holdings that have been on strong runs, instead rotating some profits into cheaper areas of the market. For example, we have added to oil major Shell, taking advantage of some recent share price weakness. We have also taken some money out of Barclays and added into HSBC, as we see more value in the latter at current levels.
Although UK equities have been volatile year-to-date, we believe the Fund’s focus on well-managed companies and structural growth themes will continue to be well-rewarded. The UK remains an attractive place to invest, as shown by recent M&A activity, with an economy that has proved much more resilient than consensus expectations. Therefore, we are cautiously optimistic in our outlook for the rest of 2018.
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.
CLI01162 Expiry on 15 July 2018