The fund was launched in 2012 and is managed independently of a benchmark. This concentrated strategy invests only in the least volatile businesses that can offer greater resilience than the broader equities market.
High conviction portfolio of 25-30 businesses which are likely to prove more resilient across the cycle
A focus on value opportunities amongst non-cyclical companies, targeting parts of the market that have temporarily fallen out of favour
Investing in companies with high sustainable returns on capital with the aim of delivering CPI +6%
September 2018 - Latest commentary
Equities fell initially as trade tensions and a further round of retaliatory sanctions loomed. The US choose to implement a staggered timetable of tariffs with $200bn of targeted goods to be taxed initially at just 10%, before rising to 25% in 2019. With the worst scenario having been avoided - at least for now - markets recovered to post a modest gain. A measured Chinese riposte with Beijing ruling out a devaluation saw investors choose to focus on relatively resilient economic data. Japan saw strong GDP in Q2 and the first signs of wage inflation in 20 years.
As expected, the Fed raised its benchmark rate by 25bps with short rates now surpassing inflation for the first time in this cycle. Mario Draghi signalled the Eurozone has seen a relatively vigorous rebound in inflation, though this was significantly upstaged by Italy’s proposed populist budget with a deficit at 2.4%. This conflicted with the EU’s deficit trajectory plan. The UK was unable to make progress in Brexit talks.
The Fund increased steadily on the month ahead of a rising equity market with 14 stocks rising and 15 falling in USD terms. Information Technology and Healthcare were the main positives, with Consumer Discretionary and Consumer Staples detracting. Despite Consumer Discretionary being generally soft for the portfolio, the Fund’s best performing holding was Viacom as it recovered ground with speculation that a merger with CBS could be reprised. Within Healthcare, Express Scripts performed well as it closed the valuation gap to its offer from Cigna, and Zimmer Biomet increased with the new CEO communicating well on some of the production challenges they are resolving. Reckitt Benckiser produced good numbers showing an inflection in operating momentum, whilst Oracle and HP both traded confidently through results.
Detractors included advertising agencies WPP and Publicis, both down on the back of WPP’s results. Whilst WPP demonstrated a modest turn to positive organic growth, the market was fixated with a 40bps reduction in margin – equivalent to about 2.5% of earnings. We believe the share price move represents an over-reaction, especially given the company’s already low rating and with the company beginning to gain traction with new client wins. Nasdaq gave up ground after a good run and an embarrassing margin loss in Nordic energy trading. We took profits in Medtronic, Allergan and Oracle.
Previous months’ commentaries are contained within the fund factsheets.
Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. A table with five years performance is available in the fund factsheets below.
The fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investment may rise or fall in line with the exchange rates. The fund holds a concentrated portfolio which could mean that it will be volatile when compared to its benchmark.