Portfolio manager’s comments

March 2017

The macroeconomic data published was in line with the positive trend registered in recent months, and confirmed the upturn in economic activity. Positive consumer spending figures were the main driver behind US growth, which, coupled with almost on-target inflation, justified the Fed’s decision to raise rates by a quarter of a point to between 0.75% and 1%. In the eurozone, the ECB left official rates untouched as business confidence hit a six-year high and inflation levelled off after recent spikes.

This positive economic data and the more hawkish tone at central banks put pressure on high-rated bonds, especially German bunds. Peripheral bonds performed well as political uncertainty eased. Emerging market sovereign debt closed the month with gains. Yields on corporate debt also rose last month, so credit closed the month slightly down.

Equity markets continued to rise on the back of accelerated economic growth, with European markets outperforming. Emerging market equities also did well. US equities steadied and the S&P500 closed the month virtually flat. Japan was the exception to this positive overall performance.

Crude prices fell as a result of increased supply, following confirmation that oil production in the US continues to rise, driving up inventories.

March International – March Vini Catena

In March, the March International – March Vini Catena A EUR fund returned 1.38%, compared with 0.71% for the MSCI World LC. Year to date, the fund is up 6.15% versus a gain of 4.91% for the reference index.

The most heavily-weighted sectors in the portfolio are distilled spirits, wines, industrial machinery and distribution. By country, the fund’s investments are focused on France, the US and Germany. The stock that contributed the most over the month was Zignago Vetro Spa, followed by LVMH and François Frères (Tonnellerie), while Brown Forman was the name that contributed the least to the portfolio’s performance, followed by Vidrala and Liquor Stores.

No major transactions were undertaken in the portfolio in March. It is, however, worth highlighting the current operational strength of Tonnellerie François Frères, which recently confirmed its long term sales targets after posting quarterly results, with continued growth for wine and an upturn in whisky. Besides, the tax measures recently approved in Italy to encourage investment in funds with exposure to Italian small and mid-caps buoyed Zignago Vetro, which has gained 30% year to date.

 

March International – The Family Businesses Fund

In March, the March International – The Family Businesses Fund A EUR returned 2.51%, compared with 0.71% for the MSCI World LC. Year to date, the fund is up 8.18% versus a gain of 4.91% for the reference index.

The most heavily-weighted sectors in the portfolio are consumer discretionary, consumer staples and industrials. By country, the fund’s investments are focused on Switzerland, France and the US. The stock that contributed the most over the month was Sonae, followed by Samsung Electronics and Roche Hldg, while eDreams Odigeo, Berkshire Hathaway y Deutsche Euroshop were the names that contributed the least to the portfolio’s performance.

In March, we had the opportunity to invest in two new names: Prosegur Cash and Hasegawa. We participated in the Prosegur Cash IPO carried out by Prosegur to avoid the diluting impact of the listing on the parent company. Hasegawa is a Japanese manufacturer of fragrances and flavouring for the food and drink sector, with leadership positions in its domestic and regional markets.

 

March International – Valores Iberian Equity

In March, the March International – Valores Iberian Equity A EUR fund returned 4.25%, compared with 9.50% for the Ibex 35. Year to date, the fund is up 7.22% versus a gain of 11.88% for the reference index.

The most heavily-weighted sectors in the portfolio are consumer discretionary, industrials and financials. We raised exposure to Portugal to 9.2% by buying NOS and holding Sonae and CTT – Correios de Portugal. The stock that contributed the most over the month was BBVA, followed by Banco Santander and Euskaltel, while eDreams Odigeo, Merlin Properties and Acerinox were the names that contributed the least to the portfolio’s performance.

We cut exposure to the financial sector, reducing the positions in BBVA and Banco Santander, which have outperformed over the last month. We also sold Abertis and Antena3 after both stocks performed well and hit our target prices. On the other side of the ledger, we bought Prosegur, which is trading at a discount following the Prosegur Cash IPO. We also raised exposure to the utility sector through Red Eléctrica, which is currently trading at attractive valuations. We resumed a position in NOS, where we see substantial upside potential following the unexpected increase in capex.

 

March International – Torrenova Lux

In March, the March International – Torrenova Lux A EUR fund returned 0.50%. Year to date, the fund has returned 0.87%, in line with its target of preserving capital and beating inflation plus 2%.

We are waiting for the markets to steady, offering the opportunity to increase portfolio exposure. With that in mind, we are currently positioned cautiously, with equity investments accounting for around 19.8% of the portfolio.

There were no major changes to the equity portfolio in March. We made minor adjustments, including paring down exposure to names related to the financial sector, which continues to be expensive, and increasing the weight of the pharma sector, which is lagging somewhat.

In the fixed income component, we sold positions with a negative IRR and replaced them with new issuances like TEVA, which has issued a 2-year bond, as well as increasing exposure to Pfandbriefe and corporates in industries other than the financial sector. The portfolio duration was kept at 1.0 year with an IRR of 0.36%.

 

 

 

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This document is for information purposes only.

The official documentation for the fund(s) referred to herein is available at www.cnmv.es, www.march-am.com and www.bancamarch.es.

Clients or prospective investors should bear in mind that this document does not constitute an investment recommendation by either March Asset Management, S.G.I.I.C., S.A.U. or Banca March, S.A. Clients or prospective investors should base their investment decisions on specialist third-party tax, legal, financial, regulatory, accounting advice, or any other form of counsel, as appropriate.

Neither March Asset Management, S.G.I.I.C., S.AU. nor Banca March, S.A. take responsibility for any direct or indirect costs or losses resulting from the use of this document or any actions undertaken based on its content.

The client or prospective investor should be aware that past performance is not a reliable indicator of future results and that the risks related to the fund(s) referred to herein are outlined in the official documentation available on the websites indicated above.

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