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MI Chelverton European Select Fund – Monthly Manager Commentary – March 2019

MI Chelverton European Select Fund – Monthly Manager Commentary – March 2019

European markets were somewhat subdued over the month. The ECB substantially downgraded its growth forecasts for the Eurozone, now seeing annual GDP growth of just 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021. As recently as December 2018, the growth forecast for 2019 had been 1.7%. This significant reduction in the outlook was the main reason why the equity market rally in Europe began to stall in March.

The fund enjoyed a positive performance during March. IFG, one of our financial services holdings, received a bid approach. Leonardo (aerospace and defence) performed well following positive results, and Novartis also contributed to the positive month, as the market took on a slightly more defensive stance following the ECB’s growth downgrade.

At the other end of the spectrum, Bayer (pharmaceuticals and crop science) was weak, following another disappointing legal decision surrounding its Roundup product. We believe that the shares fully discount the likely liability here, and have topped up our holding. ING Groep and Nordea were both weak, as the subject of money-laundering was again a dominant issue for European financials.

It was an active month in terms of investments. The fund purchased five new holdings, and exited three. Purchases were Aubay and Knowit (both IT service companies), Danone (nutrition), Bpost (mail) and ST Microelectronics (semiconductors). The fund exited Unicredit (Italian bank), Kion (warehouse automation) and Data Respons (IT services).