Europe in November

BY WILLEM VINKE

Monthly Fund Commentary
21 Dec 2016

BY WILLEM VINKE

The Fund’s benchmark returned +1.09% in November. NYMEX WTI CRUDE was up 5.51% on the month as there was positive discussion on production caps. The US 10year treasury yield increased 56bps to finish the month at 2.31% after Donald Trump won the US election and gave positive indications for an improving economy following a bitter and mostly negative campaign from both sides.

Yields globally reacted to the surprise US election result with the German 10year treasury yield increasing 11bps to finish the month at 0.275% with the Swiss 10year treasury yield also increasing by 26bps to finish the month at -0.127%. The UK 10year gilt yield increased 17bps to finish the month at 1.42%. There was, and continues to be, uncertainty regarding what sort of exit the UK will have from the EU and the potential challenges the UK government faces. Gold traded down 8.14% to finish at $1,173 as investors sold safe haven assets following the US election result, with silver trading down 7.81% to finish the month at $16.51. The Euro weakened over the month both against the US$ down 3.57% to 1.059 and against sterling down 5.59% to 0.847.

The Fund underperformed its benchmark by 5.17%* in November. Financials, Materials and Energy were the best performing sectors in the benchmark whilst the worst performing were: Utilities, Telecoms and Consumer Staples. The Fund’s top performing stocks were: Sophos, Qiagen and Auto Trader and the worst were: Livanova, Italgas SPA and CTS. During the month the Fund exited positions in: Italgas, Novo Nordisk, Sage, SNAM and Unilever, whilst ASR Nederland, Barclays, Koninklijke Ahold Delhaize, Legal & General, NN Group and UBS were bought.

The Fund exited Novo Nordisk as it became clear the challenges the company is encountering were neither over nor fully priced in. Positions in Unilever and Sage were closed on valuation grounds. Italgas was spun out from SNAM and the Investment Adviser took the decision to close both positions due to the risk profile of Italian utilities. Following the political changes in the US and expectations for inflation and the yield curve, the Investment Adviser saw potential value in select financial names.

*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 12/12/16 and are based on internal research and modelling.