The Strategic Europe Quality Fund outperformed its benchmark index in March by 5.89%. The Fund’s relative overweight to the consumer staples and health care sectors generated significant alpha, whilst the relative underweight to the financials sector also generated noteworthy alpha.
Stock selection was particularly strong for the industrials sector. Unsurprisingly, all sectors were in negative territory for the benchmark; financials, real estate and industrials suffered the most.
At a single stock level the best performing stock for the European Fund was Wolters Kluwer and the worst performing in terms of alpha were Livanova and Mowi.
The Strategic Global Quality Fund also outperformed its benchmark index in March, returning +4.86% on a relative basis. The Fund’s significant relative overweight to the consumer staples sector was the largest contributor to alpha; whilst the relative underweight to the financials sector also delivered significant alpha. Similar to the European index, all sectors ended the month in negative territory, with energy, financials and real estate being the worst performing sectors.
At a single stock level for the Global Fund, the best performing stock was Wolters Kluwer and the worst were Livanova and Wabtec.
March saw one of the worst months for financial markets, the S&P 500 closed down 12.5% for the month, its biggest drop since October 2008, and its worst quarter ever. The rest of the world followed a similar pattern, with European and Asian equities seeing a sharp sell off. Fresh central bank policy easing pushed treasury yields to record lows.
The COVID-19 outbreak will continue to create uncertainty and market volatility until “normal life” somewhat resumes and the economic impact can be better assessed. However, this sharp market correction does provide the Investment Adviser with an opportunity to find new ideas for the portfolios and to add to some of the Fund’s positions on weakness.
The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the Funds as of 17/04/2020 and are based on internal research and modelling