May update – preference for defensive portfolio positioning maintained

The Strategic Europe Value Fund returned -1.69% in May, outperforming its index by 3.25%. The largest contributor to alpha was Consumer Staples, driven by stock selection and the Fund’s relative overweight to the sector. Stock selection for both Industrials and Information Technology was also significant. The largest, albeit minor, detractor to alpha was the Fund’s relative underweight to the Utilities sector.

Commentaire Mensuel
21 Jun 2019

The Strategic Europe Value Fund returned -1.69% in May, outperforming its index by 3.25%. The largest contributor to alpha was Consumer Staples, driven by stock selection and the Fund’s relative overweight to the sector. Stock selection for both Industrials and Information Technology was also significant. The largest, albeit minor, detractor to alpha was the Fund’s relative underweight to the Utilities sector.

May was a difficult month for markets, with all sectors in the benchmark delivering negative returns. The worst performing sectors were Materials, Financials and Consumer Discretionary.

At a single stock level, the best performing stocks for the Fund were Smith & Nephew, Nestle, Relx and Beiersdorf; while the worst performing stocks were Fresenius Medical Care, ABInbev, RBS and Takeda Pharmaceutical. During the month, the Fund sold its positions in Admiral Group and Bayer and initiated positions in Sophos and Vifor pharma.

The Strategic Global Quality Fund returned -2.28% in May, outperforming its benchmark by 3.49%. The largest contributor to alpha was the Consumer Staples sector, driven by stock selection and the Fund’s significant relative overweight to the sector. Information Technology was also a significant contributor to the Fund’s outperformance, driven by stock selection. The only noteworthy drag was Health Care, mostly due to stock selection.
All sectors for the benchmark were in negative territory apart from the Real Estate sector; with the worst performing sectors being Information Technology, Energy, and Materials.

The best performing stocks for the Fund were Nestle and Worldpay; while the worst were Fresenius Medical Care, Takeda Pharmaceutical, and ABInbev. The Fund exited its position in Sage during the month.

According to the Investment Adiver, markets remain concerned about the escalating trade dispute between the U.S. and China and recent global economic data, which is deteriorating, with few signs of improvement in the near term. The team continue to maintain a strong preference for a defensively positioned portfolio in the current market environment, their primary concern being the contraction of global liquidity. The team expect to see further market volatility in the second half of this year.

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the funds as of 13/06/2019 and are based on internal research and modelling.