Companies must deliver on expectations

BY WILLEM VINKE

Monthly Fund Commentary
17 Sep 2015

BY WILLEM VINKE

The VIX spiked to above 50 in August as news flow from China worsened. US equity markets were off 11.2% at their worst, Europe 13.9%, before the PBoC cut rates and signs that the Fed may not raise rates in September saw both regain some ground by month end.

The German 10-year rose 16bps to 0.8%, and 10-year Treasuries finishing at 2.22%, broadly unchanged from 2.18%. The prices of oil, copper and aluminium all fell to 6-year lows during August, and the price of Brent declined to $48 from $52 per barrel.

The Fund outperformed its benchmark index in August by 2.19%. At the stock level the biggest contributors to performance were Optimal Payments, GrandVision and Galenica, while Fagron, Unilever and UBS were the largest detractors. New positions were established in William Demant and Shire, whilst the Fund’s positions in UBS, SES and Carlsberg were closed. Though the underlying SES investment case remains intact, the company is entering a period of uncertainty, and with UBS the share price has now largely priced in the Investment Adviser’s expectations.
The market’s focus is now on the FOMC meeting this month, and the effect ongoing changes in China will have on both the emerging markets and global trade. Expectations remain that the Federal Reserve will most likely raise rates before year end, and with the heightened uncertainty this brings it makes it all the more important that the companies the Fund invests in can deliver on expectations.

The market’s focus is now on the FOMC meeting this month, and the effect ongoing changes in China will have on both the emerging markets and global trade. Expectations remain that the Federal Reserve will most likely raise rates before year end, and with the heightened uncertainty this brings it makes it all the more important that the companies the Fund invests in can deliver on expectations.

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 10/09/15 and are based on internal research and modelling.