The stimulus cushion

The Strategic Europe Quality Fund returned 0.56% in June. Sector allocation was the main detractor to alpha, most notably the Funds relative underweight to the financials sector and relative overweight to the health care and consumer staples sectors.

Monthly Fund Commentary
20 Jul 2020

The Strategic Europe Quality Fund returned 0.56% in June. Sector allocation was the main detractor to alpha, most notably the Funds relative underweight to the financials sector and relative overweight to the health care and consumer staples sectors.

The best performing sectors for the benchmark over the period were financials, information technology, utilities and materials; while the worst performing sectors were health care, energy and consumer staples. There were no significant contributors or detractors to alpha over the period for the European Fund at a single stock level.

The Strategic Global Quality Fund returned 0.31% in June. The main detractor to return was stock selection in the consumer discretionary, information technology and industrials sectors. The Funds relative overweight in the consumer staples space was also a detractor – however this was largely offset by strong stock selection for the sector.

The best performing sectors for the benchmark over the month were information technology, consumer discretionary, materials and financials; while health care, utilities and energy were the worst performing sectors. At a single stock level, Wabtec was the main detractor over the period for the Global Fund.

Market Outlook

On a relative basis, the Funds were negatively impacted during Q2 as the market rebounded strongly on the back of substantial market stimulus from central banks and governments, and as economies slowly began to open up. This stimulus has helped to cushion the economic impact of COVID-19 to some extent, but the true economic impact remains unclear in the Investment Adviser’s view. Many economic and political risks remain and more volatility is likely in the second half of the year. Therefore, the Investment Adviser will maintain a cautious view, preferring to invest in high quality companies for the most part, that the Team believe will be better placed to endure any market volatility ahead.

 

The views and statements contained herein are those of Lofoten Asset Management in their capacity as Investment Adviser to the funds as of 15/07/2020 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.