First advanced economy defaults on IMF Loan


Fund Commentary
23 Jul 2015


The focus of European investors remained on Greece throughout most of June, with the MXEU ending down 4.78% as a result. The month began with a postponed €300mln IMF repayment, after which numerous talks ended without agreement whilst the ECB continued to prop up the Greek financial system through emergency funding, culminating in the first advanced economy defaulting on an IMF loan and the Greek government calling for a 5th July referendum over the bailout proposals.

Meanwhile, as European economic data improved, and following an ECB meeting in which inflation forecasts were increased, bonds sold off with the German 10yr rising 27.7bps during the month to 0.76%. The US 10yr also rose 23.2bps to 2.35% on the back of stronger U.S. economic data. China remained a risk as exports and imports disappointed, and the Shanghai stock market fell 7.25% despite further monetary easing by the Chinese government.

The Fund outperformed its benchmark in June by 0.27%. At the stock level the biggest contributors to performance were Auto Trader, Pandora and Diageo, with Amadeus, Optimal Payments and 
Fagron the biggest losers. The CTS Eventim, Wirecard, Sanofi and Playtech positions were exited, while a new holding in Michael Page was established.

Geopolitical uncertainties remain, but it is our view that the improving European economy, and the ongoing support of the ECB and its QE programme, will remain the key near term drivers for European equities. 

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 22/07/15 and are based on internal research and modelling.