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THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 30 September 2015
C
ommodities took a hammering during
the quarter, contaminated by fears of a
China slowdown. Closer to home, signs of a
tight labour market are emerging and, with
productivity still lacklustre, concerns remain
as to how the UK will sustain its growth rate.
Mining has been an area we’ve avoided until
our recent selective additions,so not holding
Glencore aided performance as the company’s
credit rating spooked the market in the face of
falling commodity prices.While macro
headlines drove sentiment,more UK-focused
small- andmid-sized capitalised companies held
up,as the UKwas identi ed as the fastest-
growing developedmarket economy,and a
pick-up in business investment emerged.Our
holdings in Rentokil,Ryanair and Card Factory
remain una ected by the market turmoil,while
Amlin bene ted from Japanese bankMitsui
Sumitomo’s bid. In times of volatility investors
can rush to areas of perceived safety, such as
staples and tobacco stocks;we feel these‘bond
proxies’ are on valuations that make them
vulnerable.But,during the quarter,our stance
detracted from performance: not holding BAT,
Imperial Tobacco and Reckitt Benckiser
contributed to relative underperformance.
A di cult trading environment hampered our
holdings inTesco andWmMorrison, too.
More widely,we harbour concerns about the
US shale industry,with evidence that the
debt-funded boom is running short of funding.
The implications for the oil price are clear.We
are focusing our research on the impact of this
through the prism of stock selection.
MAJEDIE
UK Growth
Joint manager: UK & General Progressive
Small- and mid-cap companies
have held up well
Concerns remainover
how theUKwill
sustain its growth rate
Richard Staveley, James de Uphaugh,
Matthew Smith and Chris Field
G
lobal equity markets saw heightened
volatility as a result of uncertainty
about the timing of US interest rate hikes
and persistent concerns about a Chinese
economic slowdown. In particular, China’s
stock market declines and the surprise
devaluation of the yuan stoked global growth
fears and negatively a ected emerging
market currencies.Weakness in commodities
and commodity producers were also in focus
as the price of oil came under pressure,
along with other rawmaterials. However,
economic data from the US and Europe
showed signs of stabilisation and momentum
for those economies.
An overweight position in consumer
staples and stock selection in materials
contributed to performance, while stock
selection in consumer discretionary and
industrials detracted. During the quarter,
we added Exxon Mobil Corporation to
the strategy and soldAon plc, Chevron
Corporation, Deutsche BörseAG, Nippon
Telegraph andTelephone Corporation (NTT),
StatoilASA,Viacom and Experian plc.
Longer-term growth-rate expectations
have been falling and we believe markets
have entered a structurally lower-growth
environment, as re ected by a attening yield
curve, declining commodity prices, the threat
of de ation and high global debt.We continue
to identify high-quality businesses that we
believe have strong management teams and
franchises that are able to protect cash- ow
streams under more challenging scenarios.
MANULIFE
Global Equity Income
Long-term growth is slowing but
there are still good opportunities
Strong data fromthe
US andEurope help
o set Chinese drop
T
he fund generated a positive return during
a quarter when equity markets su ered a
marked sell-o . Commodity prices were hit,
with Brent crude oil and copper su ering
sharp declines, which had both a positive and
negative impact on the portfolio.We don’t
hold BP or Glencore – thus aiding our relative
performance – but we do have positions in the
mining sector (RioTinto and BHP Billiton),
which were impacted by the fall in
commodity prices.
Our general nancials continued to perform
well:Amlin received a bid from Japanese bank
Mitsui Sumitomo;Admiral announced full-year
results demonstrating continued growth,a
rising dividend and steady progress in the US
business build-out;and Direct Line reported
similarly strong results and indicated an
intention to return to volume growth.Man
Group,too,re-rated following good
performance fromGLG.
There were a few disappointments,but an
obvious detractor was Dutch insurer Delta
Lloyd,with shares down nearly 40% (in GBP).
We have used this share priceweakness to double
our position in the company.Not holding BAT,
ImperialTobacco and Reckitt Benckiser was a
slight negative contributor;we feel these‘bond
proxies’are on valuations that make them
vulnerable,so we regard them as risky.
A nal thought:althoughmarket volatility
can be tiring,it is also invigorating because it is
a friend to the opportunistic investor;we
continue to use all the resources available to us
to ensure the ideas pipeline is maintained.
MAJEDIE
UK Income
Market volatility is ideal for the
opportunistic investor to capitalise
UKholdings have
performedwell,
despitemarket falls
Chris Reid
Paul Boyne and Doug McGraw
