Cautious macro view proves wise

The Strategic Europe Quality Fund outperformed its index by 1.25% in February, returning -7.22%. The majority of alpha generated came from the healthcare sector, driven by strong stock selection.

Monthly Fund Commentary
25 Mar 2020

The Strategic Europe Quality Fund outperformed its index by 1.25% in February, returning -7.22%. The majority of alpha generated came from the healthcare sector, driven by strong stock selection.

Stock selection for the industrials sector was also a significant contributor to alpha. The only noteworthy detractor to alpha over the month was the consumer staples sector, mostly due to one stock. February saw all sectors end the month in negative territory, with energy being the largest detractor for the benchmark (-14.5%); the utilities sector was the least impacted.

At a single stock level the best performing stock for the Strategic Europe Quality Fund was Qiagen, which was bid for by Thermo Fisher Scientific at the beginning of March; the Fund has now exited the position. The bottom performing stock in February was AB InBev.

The Strategic Global Quality Fund outperformed its index by 0.25% in February, returning -8.20%. The majority of alpha generated came from strong stock selection in the information technology sector and the Fund’s cash allocation. The main detractor was the consumer staples sector, mostly due to one stock.

Similar to the European index, all sectors ended the month in negative territory, with energy being the worst performing sector. Communication services and healthcare were the least impacted.

At a single stock level for the Strategic Global Quality Fund, the best performing stock was Clorox and the bottom was AB InBev.

Market Outlook

Recent developments regarding coronavirus and market reaction over the last few weeks have only confirmed the Investment Adviser’s cautious macro view. The Team have taken the funds more defensive over the period and will monitor the situation closely as the impact becomes clearer.

Globally, the economy was not in a healthy state and the Investment Adviser believes this outbreak and its impact on global growth will likely lead to a recession. Market volatility will continue and the Investment Team will adjust the portfolio as necessary.

 

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the funds as of 19/03/2020 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.