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THE INVESTOR CENTRE
All information correct as at 31 March 2016
MANULIFE
Global Equity Income
Stock selection in consumer staples
and discretionary aided performance
Goldperformswell as
investors seek refuge
fromuncertainty
MAJEDIE
UK Growth
Joint manager: UK & General Progressive
UK food retail and commodities
contribute strong performance
We are on the cusp
of amajor rotation in
market leadership
MAJEDIE
UK Income
Portfolio bounced back from poor
start as commodity prices recovered
Strong rebound after
tough start to the year
in globalmarkets
T he fund endured a tough start to
the year: on the back of the oil
price collapsing, investors panicked
about potential debt impairments and
sold stocks with any semblance of
being financial.But, sincemid-February,
the portfolio has recoveredwell.Many
of the general financials posted decent
results, revealing that insurers hold
more than enough capital to satisfy
Solvency II requirements; and banks’
balance sheets are stronger than in 2008.
Pearson announced a surge in net
profits; Lloyds Banking Group
announced an increased dividend.Our
avoidance of Royal Dutch Shell was a
key detractor from performance (due
to our concerns over the sustainability
of its dividend), and our positions in
Aviva and Legal &General softened
believe the stock
market is wrongly reflecting on the
Financial Crisis (‘preparing to fight the
last war’) and that a low oil price is
positive for the global economy,while
poor-quality assets associated with the
past few years of QE are not generally
held by the banks and insurance
companies in your are
confident that there is plenty of
potential upside in your portfolio,
with the yield firm at 4.8%.
Global equity markets had a volatile
start to the year as collapsing oil
prices and a weak commodities sector
negatively affected various sector and
global growth outlooks.The strongest-
performing asset class was gold,which
investors favour in times of uncertainty.
Stock selection in the consumer
discretionary and consumer staples
sectors contributed to the strategy’s
performance. Individual contributors
included Verizon Communications,
Macy’s andAmcor.Underweight
exposure to the energy and utilities
sectors detracted from the strategy’s
performance. Individual detractors
included PNC Financial Services
Group,Novartis and HSBCHoldings.
During Q1,we sold holdings in
McDonald’s andAccenture.
Currently, our biggest concerns are
the risk of deflation, excess debt and
slowing global growth.With the
decline in market prices,US equity
markets appear more attractive but
remain highly valued on a cyclically
adjusted price-earnings basis.
European multiples are lower than
their US counterparts and appear to
have more earnings recovery potential,
although much of this is sourced in
structurally challenged industries.
Commodities and UK food retail
shares were the main drivers of
performance during the quarter,with
WmMorrison shares posting a
12-month high andTesco announcing
its 14th month of consecutive volume
growth.The mining sector has enjoyed
a strong rally since the January lows.
News fromChina is improving, too,
with encouraging signs of a pick-up in
economic activity.
Our bank holdings have been slightly
weak and there is concern over the
sector’s lending to the energy sector.
This is not a repeat of 2008: bank
balance sheets are far stronger, as the
coreTier 1 ratios show.HSBC put the
issue of energy exposure into context
recently: it is a third of subprime
exposure and the bank now has twice
as much equity.Our bank holdings
trade at less than book value (Barclays
0.6x) and offer significant value.
We have been saying for some time
that we are on the cusp of a major
rotation in market leadership:we are
beginning to see signs of investors
questioning the excessively stretched
valuations of the‘quality growth’shares,
especially with commodity prices on
the rise and the strength of bank balance
sheets at last being recognised.
Richard Staveley, James de Uphaugh,
Matthew Smith and Chris Field Chris Reid Paul Boyne and Doug McGraw
36 | THE INVESTOR