BY WILLEM VINKE
The announcement by the European Central Bank (ECB) of a larger than expected quantitative easing (QE) programme resulted in a strong rally in European equities, with the MSCI Europe finishing up 7.15%.
Surprisingly, and pleasingly, the Fund outperformed its benchmark index in January by 0.8%.
The bond markets told the same story, with German and US ten year yields falling to 30bps and 1.64%, respectively. Longer-term, another major effect this should have is to weaken the Euro, especially given current and forecast US monetary policy. January also saw the International Monetary Fund (IMF) and World Bank cut their global GDP forecasts, the SNB drop its Euro cap on the Franc, victory for Syriza in Greece and the declines in commodity prices continue.
Surprisingly, and pleasingly, the Fund outperformed its benchmark index in January by 0.8%. At the stock level the biggest contributors to performance were Beiersdorf, SCA and Safran. No new positions were established but the Swatch holding was sold, as the Investment Advisor expects Swiss exporters to suffer following the SNB’s decision.
Looming geopolitical uncertainties remain, but it is the Investment Adviser’s belief that QE will prove an ongoing tailwind for European equities. Longer-term, yields should remain low and the USD appreciate further against the Euro. This is good news for the large cap, international companies which feature heavily in the portfolio.
Commentary provided by Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 11/02/15.