The Strategic Europe Quality Fund returned 5.65% in April. The healthcare sector was the largest contributor to alpha, driven mainly by the Fund’s relative overweight to this sector, whilst the relative overweight to the energy sector was the largest detractor to alpha over the month.
All sectors apart from energy, ended the month in positive territory for the benchmark. Information technology, health care and consumer discretionary were the best performing sectors.
At a single stock level there were no significant contributors or detractors to alpha over the period for the European Fund.
The Strategic Global Quality Fund returned 7.36% in April. The financials sector was the largest contributor to alpha, owing to the Fund’s relative underweight to this sector. In addition, the industrials sector also contributed to alpha, generated by strong stock selection, as did the utilities sector through its relative underweight.
The significant overweight to the consumer staples sector was the largest detractor to alpha. All sectors ended the month in positive territory for the benchmark; with the best performing being consumer discretionary and energy, with utilities and consumer staples being the worst performing sectors.
At a single stock level for the Global Fund, the largest contributor to alpha was Wabtec and the largest detractor was Kao Corp.
April saw somewhat of a market rebound, however the economic impact of COVID-19 is not over in the Investment Adviser’s opinion. In the Team’s view it makes sense to own higher quality companies with strong cash flows, stable earnings and low debt levels.
The Team will monitor the situation closely as countries in Europe start to open up and more economic data becomes available. The true economic impact is still relatively unknown at this stage but the Investment Adviser believes maintaining a cautious approach is the right approach.
The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Funds as of 12/05/2020 and are based on internal research and modelling.