BY CRAIG RIPPE, HEAD OF UK EQUITIES
Volatility reared its head in February, which resulted in a modest sell-off in UK equities. This was due to stronger growth and higher-than-expected inflationary data in the US spooking investors. In addition, the global withdrawal of monetary easing means that many now believe that interest rates will rise faster than previously thought, undermining the short-term attractiveness of equities in particular.
Against this background, utilities were one of the worst performing parts of the UK market, given their bond proxy characteristics. Our exposure to this sector meant we lagged in performance terms in February, but we believe utilities have been oversold, whilst they are also a source of a secure, defensive income stream. Elsewhere, earnings for companies within the portfolio have been reported as expected, with William Hill and JD Sports in particular performing strongly in February. GKN also gained as we enter the final throes of Melrose’s bid for the company. As a shareholder in both stocks, we expect the bid to go through given the turnaround opportunity.
In terms of portfolio activity, we added Hiscox to the portfolio in February, as we continue to be fans of the insurance sector in general. Despite a record year for catastrophes in 2017, Hiscox retains a resilient capital base and we expect the business to grow in 2018 as market pricing improves. Although the outlook for UK equities in general remains uncertain, we are still able to find stock-specific opportunities such as Hiscox, as the underlying strength of the global economy remains supportive of a number of structural growth themes.
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.
CLI01133 Expiry 15 June 2018