LF Canlife UK Equity Income Fund Update

sector rotation

BY CRAIG RIPPE, HEAD OF MULTI-ASSET FUNDS

The third quarter of 2018 was characterised as a nervous market. This saw investors rotate into more overlooked sectors, such as traditional defensives and value stocks. For example, healthcare had struggled year-to-date, but saw a resurgence in Q3, with Hikma Pharmaceuticals – which we hold in the Fund – one the strongest performers.

This reversal in sentiment also saw very beaten up stocks such as BT begin to see their fortunes turn, grinding out a 4% return amidst the market falls. We have been long-term holders of BT within the Fund and – although it has struggled in recent years – with a dividend yield in excess of 6% and a P/E ratio of just 9x, we expect further upside as new management continue to take action.

Elsewhere the automobile sector struggled due to trade war concerns and wider macroeconomic uncertainty, whilst the outlook for the non-life insurance sector improved as 10 year UK gilt yields moved from 1.2% in July to 1.6% by quarter-end. In terms of portfolio activity, we exited our position in esure following its sale to Bain Capital, took some profits from our Hikma position and sold Sports Direct. These moves were made to reduce our exposure to the more growth areas of the market as our expectation is that investor rotation will continue in Q4. 

Important Information 

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.

CLI01311 Expiry 31 January 2019

 

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