Europe in June 2017

BY WILLEM VINKE

Monthly Fund Commentary
26 Jul 2017

BY WILLEM VINKE

The Funds benchmark returned -2.48% in June. NYMEX WTI CRUDE was down 4.72% in June, finishing at $46.04 as ongoing disputes regarding production caps and inventory levels made headlines. The US 10y treasury yield increased 4.6%, finishing the month at 2.30% following further hawkish comments regarding US rates.

The German 10y treasury yield increased 53.33% to finish the month at 0.47%. The Swiss 10y treasury yield also increased by 86.26% to finish the month at 0.023%. The UK 10y gilt yield rose by 20.09% to close the month at 1.26% following comments from a BOE representative that UK rates may have to increase sooner than previously anticipated. Gold decreased by 2.15% to finish at $1,242, with silver decreasing by 4.01% and finishing the month at $16.63. Over the month, the Euro strengthened against the US$ (up 1.62%) and finished at 1.43 At the same time it was up 0.55% against the Sterling, finishing at 0.88.

The Fund underperformed its benchmark* by 0.77% in June. The benchmark’s best performing sectors were Financials, Materials and Industrials, whilst the worst performing ones were Telecoms, Energy and Utilities respectively. In terms of generating returns, the Fund’s top performing stocks were Livanova, Amadeus and Ing Groep, whereas Koninklijke Ahold, Criteo and Stroeer were the worst performing ones.

During the month, the Investment Adviser exited positions in Essity, Red Electrica and Svenska Cellulosa and bought shares in Bayer and SBM Offshore. Post the split of SCA, both, Essity and the new Svenska Cellulosa positions were sold due to changing fundamentals within the Essity business. Red Electrica was sold, as the share’s risk reward balance changed and the Investment Adviser saw better investment opportunities elsewhere. Bayer was bought post the Monsanto deal, which the Investment Adviser feels the market has yet to fully appreciate and which is likely to materialise in a timely manner. SBM Offshore has signed its first new contract in some time, which should make this part of the business profitable once again, while the leasing unit remains fine. According to the Investment Adviser’s assessment, the pipeline for more new contracts also looks promising, and as this becomes more apparent, the team expect the shares to trade up.

*Eur I Class

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 18/07/17 and are based on internal research and modelling.