Performance commentary
So it’s been a busy summer period again, the market’s been focused on trade tensions and escalating geopolitical tensions, in particular trade wars with China. Closer to home, we’ve seen Brexit negotiations and worries about a ‘no-deal’ resolution; alongside that we’ve seen interest rates rising due to inflation pressures coming through. In this background the US market’s been a strong performer, led by the technology sector; more cyclical European markets have been a little bit more muted; and emerging markets have been weak due to dollar strength.

In that environment, the Fund has produced a positive performance and actually beat its comparative index. So key drivers of performance this quarter have been our overweight to the technology sector, in particular Microsoft has benefited from its cloud revenue business, which has actually been very, very strong, and we’ve also had exposure to the battery manufacturer Samsung SDI, which has benefited from the key trends that we’re seeing in the automotive industry, namely companies having to move towards a more electrified fleet due to regulations around CO2 emissions.

One of the key areas where performance has lagged has been in the semiconductor market, reason being that the market’s been worried about short-term cyclical activity. We think actually the long-term structural play and demand for semiconductors continues to be very, very strong due to automation, the rise in artificial intelligence, and moves towards renewable energy.

Activity review
In terms of activity, what we’ve done is we’ve actually reduced some of the top performers in the portfolio; we’ve started reducing the technology weighting within the portfolio and actually recycling that into areas that have underperformed. So we’ve started to increase our financials exposure, which has been a laggard this year; we’ve increased our exposure to the health-care sector – we’ve introduced a position in Merck, the pharmaceutical company: it has a large cancer franchise and one of its key drugs Keytruda has recently won approval for lung cancer and is well positioned to take advantage of that over the next year or so, as it has first-mover advantage.

Investment strategy and outlook
In terms of outlook, we think actually in the near term, the market’s going to be focused on continuing trade tensions, negotiations around Brexit, potential tariffs and trade wars around China and the impact of that. We think that’s going to drive short-term sentiment in markets. However, we think actually what is more important is what’s happening in terms of monetary policy. We’ve gone through a very long period where interest rates have remained low, but we’re starting to see them rise and we think that’s going to be a key driver for markets going forward. Within this environment, we want to focus on companies where we think expectations – growth expectations in particular – can be met; we’re looking for companies with strong balance sheets and good free cash flows with strong thematic backing.