Sanlam Active UK Fund

The fund was one of the first funds to be launched when the firm was established. Benchmarked against the MSCI UK Index, it is a portfolio of UK companies with strong structural growth opportunities and attractive cash flows.
 

• Is overseen by a highly experienced team with complementary skillsets

• Focuses on companies with high and sustainable returns on capital with structural growth opportunities

• Is a concentrated portfolio with a long-term time horizon

UK equities fell in August along with most global equity markets, impacted by the escalating US/China trade war and waning business confidence. Slowing growth has in turn triggered a plunge in bond yields that reflects expectations for much looser monetary policy, while the resulting yield curve inversion has unnerved equity investors who see it as a harbinger of recession. In the UK, Brexit risks have also escalated, with the final outcome being as uncertain as ever.

Global recession fears have predictably seen energy, materials and financials stocks underperform whilst defensive sectors such as healthcare, utilities, telecommunications and consumer staples have all outperformed. Weakness in the information technology sector was largely a function of stock specific factors, most notably the sharp fall in Micro Focus shares.

Unfortunately the Active Fund underperformed the main market, being impacted negatively by both sector allocation and stock selection factors in roughly equal measure. An underweight stance in the above mentioned defensive sectors with corresponding overweight’s in technology and financials collectively subtracted over 1% from performance.

Positive stock contributions came from global high quality names such as RELX, Unilever and recent new holding AstraZeneca. Some more cyclical growth companies also benefitted performance, such as Flutter Entertainment, XP Power and Integrafin. These were more than offset by significant weakness in several others, most notably our technology holdings, IQE, First Derivatives and Micro Focus, the latter in reaction to a profits warning announcement. Most of the fallers simply reflected weak sentiment with Taylor Wimpey, Rolls Royce, Intercontinental Hotels and Prudential all suffering.

In a quiet month activity-wise we sold the remaining small position in Wood Group and trimmed our large holdings in Howden’s and Whitbread, while adding to Intercontinental Hotels and Unilever. As remarked last month, we continue to believe that a lot of negative expectations are now embedded in relatively modest UK equity valuations, creating attractive opportunities for longer term investors.

Previous months’ commentaries are contained within the fund factsheets.