July Update: More volatility to come?

The Strategic Europe Quality Fund returned 1.40% in July, outperforming its index by 1.10%. The largest contributor to alpha was the Consumer Staples sector, driven both by stock selection and the Fund’s relative overweight to the sector. Stock selection within the Health Care sector dragged on alpha during the month.

Monthly Fund Commentary
28 Aug 2019

The Strategic Europe Quality Fund returned 1.40% in July, outperforming its index by 1.10%. The largest contributor to alpha was the Consumer Staples sector, driven both by stock selection and the Fund’s relative overweight to the sector. Stock selection within the Health Care sector dragged on alpha during the month.

The best performing sectors for the index over the month were Consumer Staples, Health Care, and Consumer Discretionary; while Materials, Energy, and Financials were the worst performing sectors.

At a single stock level, the best performing stocks were ABInbev, Worldpay, Danone and Nestlé, whilst the worst performing stocks were Sage and Fresenius Medical Care. During the month, the Fund sold its position in RBS and initiated a position in Pernod Ricard. Further, the Fund switched its positon in Worldpay to Fidelity National due to its recent acquisition of Worldpay.

The Strategic Global Quality Fund gained 0.99% in July, outperforming its benchmark by 0.49%. Similar to the Strategic Europe Quality Fund, Consumer Staples was the largest contributor to alpha, mostly driven by stock selection. The Fund’s relative overweight to the sector contributed positively to alpha, whilst currency dragged on the Fund’s outperformance. The only noteworthy detractor to alpha was the Health Care sector, mostly due to stock selection.

The best performing sectors for the index over the month were Information Technology, Communication Services, and Consumer Staples. At the other side of the spectrum, Energy, Materials, and Health Care were the worst performing sectors.

In July, the best performing stocks for the Fund were ABInbev, Worldpay, Nomura Research Institute, and Procter & Gamble, whilst the worst performing stocks were Fresenius Medical Care and SAP. The Fund switched its positon in Worldpay to Fidelity National due to its recent acquisition of Worldpay.

The Investment Adviser’s macro view has remained consistent this year, with all the data and developments confirming the team’s cautious view of the world. This said, the Investment Adviser has been surprised by the markets’ strength year-to-date given that global macro data is indicating a slowdown. Recent volatility has not come as a surprise given the disconnect between underlying developments and share price movements. The Investment Adviser believes that there is more volatility to come and therefore will continue to maintain the Funds’ defensive portfolio positioning.

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the funds as of 12/08/2019 and are based on internal research and modelling.