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THE INVESTOR CENTRE
All information correct as at 30 June 2016
MANULIFE
Global Equity Income
Financial and healthcare sectors
returned positive results for portfolio
Global equities
gained groundduring
the secondquarter
MAJEDIE
UK Growth
Joint manager: UK & General Progressive
Anglo American, BP and Rentokil
Initial helped boost returns
Rally in commodities
overshadowedbyEU
referendumvote
MAJEDIE
UK Income
Dollar-earners Pearson and Genel
Energy helped portfolio performance
Negative sentiment
drivenbymarket
shock at Brexit result
T he UK Income fund’s key positions
in nancials experienced negative
sentiment, initially from a‘buyers’
strike’ in the run-up to the UK
referendum, and then from the market
shock that ensued fromBrexit.
We halved our position in Lloyds
during the vote’s run-up.Key detractors
were Legal &General andAviva; but
we believe these stocks are 3-4 times
stronger than in the run-up to the 2008
crisis and that their business models are
unlikely to be a ected by Brexit; both
recently con rmed stable trading and
su cient balance-sheet capacity to
take account of market volatility.
Man Group had a weak quarter as
market volatility impacted performance
of its‘trend trading’AHL hedge fund;
but the product has also reported strong
ows.The stock has a net cash balance
sheet yieldingmore than 5%at present.
We have tilted the fund towards
‘dollar pro ts’ and this has helped
performance. Pearson led the way: its
earnings are mainly in dollars and it
has limited exposure to the UK.Genel
Energy, a non-UK oil company and
thus a dollar-earner,was in positive
territory.Tate & Lyle performed
favourably: it is probably the biggest
dollar-earner on the UK stock market.
A fter a volatile Q1, global equities
largely advanced over the period.
Commodity prices gained, particularly
oil, providing a more stable backdrop
for equities.The timing of US Federal
Reserve Board interest rate increases
continued to be in focus and mixed
economic data was digested. European
markets keyed in on the potential
outcomes of the UK’s referendum.
Q1 company earnings were mixed
and reinforced the theme of slow
growth among major economies.
Stock selection within the nancials
and healthcare sectors contributed to
performance while the consumer
discretionary and industrials sectors
detracted
added Chubb and sold Kohl’s, Baxter
International,Akzo Nobel and
JPMorgan Chase.Our concerns are
de ation risk, excess debt and slowing
global growth.The Fed raised interest
rates in December 2015, but global
central bank monetary policy is
remain cautious
that the stronger dollar, slow global
growth and de ationary pressures
couldoverwhelmtheUS
expected,Japan’s proposedconsumption
tax increase has been delayed. Further
stimulus may be needed.
T he vociferous EU referendum
campaign overshadowed a quarter
in which commodities experienced a
rally and UK banks, prior to 23 June,
had attracted some positive sentiment.
The UK’s vote to leave the EU
shocked markets worldwide, greatly
heightening uncertainty.
BP andAngloAmerican were the top
performers quarter to date, as
investors covered their bearish
positions in oil and other commodities.
Rentokil Initial also boosted returns.
The trio were joined in positive
territory by Lloyds, following its
Supreme Court case win.
On the negative tack,Tesco’s CEO
dampened the outlook for the rate of
growth in the rst half of the year.
However, the retailer continues its
fruitful operational transformation and
should bene t from a potential rise in
food in ation stemming fromBrexit.
Ryanair su ered from referendum
sentiment, as the decline in sterling
hurts UK holidaymakers.The Royal
Bank of Scotland also weakened on
UK economic concerns.
As exible investors,we opened a
position in BritishAmericanTobacco,
which o ers defensive support during
a time of sterling weakness.
Richard Staveley, James de Uphaugh,
Matthew Smith and Chris Field Chris Reid Paul Boyne and Doug McGraw
36 | THE INVESTOR