Fund Update – November 2018

The Strategic Europe Value Fund (EUR I Class) returned 0.13% in November, outperforming its index by 1%. The best performing sectors in terms of alpha were Health Care, Consumer Staples and Industrials.

Monthly Fund Commentary
21 Dec 2018

The Strategic Europe Value Fund (EUR I Class) returned 0.13% in November, outperforming its index by 1%. The best performing sectors in terms of alpha were Health Care, Consumer Staples and Industrials.

Stock selection was particularly strong with regards to Consumer Staples and Industrial stocks. The largest detractor from the Fund’s return during the month was the Financials sector and the Fund’s underweight to Communication Services also hurt relative performance. The benchmark returned -0.86% in November, the best performing sectors were Communication services, Utilities and Health Care; while the worst performing sectors for the benchmark were Energy, Materials and Consumer Discretionary.

The Fund’s top performing stocks were Glaxosmithkline, Smith & Nephew and Novo Nordisk. The largest detractor being SBM offshore. During the month the Fund exited the remainder of its positions in British American Tobacco and Wirecard, and initiated new positions in ABN Amro, Royal Bank of Scotland and Novartis.

The Strategic Global Quality Fund returned 1.20% in November, outperforming its benchmark by 0.06%. The best performing sector was Consumer Staples and the Funds zero weight to the Energy sector also helped. Health Care was the latest detractor during November. The best performing sectors for the benchmark were Health Care, Real Estate and Utilities; while the Energy and Information Technology sectors were the main detractors.

The Fund’s top three performing stocks were Clorox Company, Kao Corp and McDonald’s and the main detractors were British American Tobacco, Altria and Wirecard. The Fund exited the remainder of its positions in British American Tobacco, Altria and Wirecard, and initiated new positions in Danone and Procter & Gamble.

The Investment Adviser maintains it’s cautious view, concerned about the pricing of risk assets given the overall tightening of global monetary policies, the strengthening of the U.S. dollar and the impact of the normalisation of interest rates on Emerging Markets. The economic system is highly leveraged, and is particularly sensitive to shocks which are starting to appear. Political risk is increasing; the team remain particularly concerned about the relationship between the U.S. – China and the Italian situation in Europe. With regards to Brexit, they hope sense will prevail.

The investment team still retain their preference for a defensive portfolio positioning; however the market has started to move to the same way of thinking, and so the team are now finding attractive opportunities outside of their traditionally preferred sectors.

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the funds as of 13/12/18 and are based on internal research and modeling.