Central Banks maintain accomodative stance


Fund Commentary
23 Oct 2017


September was a strong month for the Fund, which reported a gain of +4.74% on an absolute basis. Overall, the Fund has posted a positive return of +21.85% on an absolute basis YTD 2017, increasing its outperformance of its benchmark to +11.90%.

In September, the biggest news has been a revival of the reflation trade following optimism around the US tax reform and the recent tone of central banks’ commentaries. The global economy remains solid and inflation still contained, enabling central banks to maintain their accommodative stance. As a result, the Fund’s benchmark was up 3.90% over the month.

In terms of Fund performance, Elis was the largest monthly contributor, followed by VA-Q-Tec and Lisi. In September, Elis benefited from the closing of the Berendsen acquisition, which put an end to arbitrage pressures on the stock. On top of this purely technical trading phenomenon, management roadshows conveyed the message that the operational performance of both, the existing business and Berendsen has been strong following a good tourism season in France and potentially larger than anticipated synergies through the acquisition. VA-Q-Tec rebounded strongly in September after its management participated in numerous investor conferences. Finally, Lisi benefited from positive sell side commentaries in September and from the announced acquisition of Termax in the US.

At the other end of the spectrum, Unieuro, Takeaway.com and Boozt were among the main detractors. The first two suffered as a result of secondary placements that took place in early September (17.5% of capital for Unieuro and 5.7% for Takeaway.com respectively), creating overhang on the stock. There was no noteworthy news regarding Boozt during the month.

One new position was added to the portfolio. The Fund participated in a secondary placement in the Swiss company Feintool that took place at CHF 105, a sizeable discount compared to the price before the announcement of the placement (12.5% versus CHF 120 on Sept 28th).

More clarity about the future direction and timing of monetary policies will be key during the coming months, both in Europe and in the US. On that front, the Investment Adviser will continue to closely monitor the announcements before year end.

The views and statements contained herein are those of Pascal Investment Advisers SA in their capacity as Investment Adviser to the Fund as of 11/10/17 and are based on internal research and modelling.