By Willem Vinke
European equities eked out small gains in September, with bond markets broadly unchanged. The foreign exchange market saw the US dollar make a further sharp advance against the Euro as the Federal Reserve and the European Central Bank (ECB) look to move their respective policies in opposing directions. For the Fed the debate is about the timing of a tightening in policy; meanwhile the ECB is confronted by a worrying economic slowdown which it seems unable to reverse. Elsewhere, the conflicts in Ukraine, Syria and Iraq, combined with falling commodity prices further eroded investor confidence.
The best performing sector of the market in September was Healthcare where the Fund has a significant proportion of its assets.
Unsurprisingly, given that downbeat environment, the best performing sector of the market in September was Healthcare where the Fund has a significant proportion of its assets. This was the major contributor to the outperformance achieved during the month with Novo, Novartis, Bayer and Sanofi registering gains in excess of 7%. Dixons Carphone, the recently merged UK electronics retailer, advanced by a similar amount following the collapse of one of its major competitors. Pandora moved to new highs, buoyed by the rising dollar and falling silver price. No new positions were added to the portfolio in September, whilst the holding in SAP (software) was sold as a result of the company announcing an expensive looking acquisition.
We enter the last quarter of 2014 with investors squeezed by paltry returns on fixed income securities and faltering earnings growth in equities. The Fund’s cautious approach has served shareholders well thus far in 2014, and should continue to do so as we enter what may be a more volatile period.
Commentary provided by Lofoten Asset Management in their capacity as Investment Adviser to the Fund as of 09 October 2014