Following a tricky September, where a surge in coronavirus cases led risk assets lower, it seems prudent to take stock given the sharp equity market recovery from the March lows. We now enter a period of growing uncertainty as increasing restrictions linked to Covid threatens to derail European economic recovery. On the eve of the third quarter reporting season all this does from a bottom-up perspective is emphasise the need to back the ‘whatever weather winners’ and secular growth names. Looking more closely at the list of outperformers you can really see the impact of ESG flows, where those most aligned to investment from the EU ‘green deal’ have continued to see positive momentum.
The L&G European Trust delivered a positive absolute return of +2.3%, which outperformed its benchmark. We saw a positive contribution from stock selection, driven by gains within our healthcare and energy exposure. Sector allocation was also positive, led by the favourable effect from the underweight in financials and overweight in consumer goods. At the stock level, Puma, Adyen, Soitec, Campari Group, Vestas Wind Systems and Delivery Hero were strong relative contributors. Alfen, Varta and Teamviewer underperformed in the period.
We introduced a new position in digital solutions company UnifiedPost Group. The company provides a cloud-based, one-stop solution designed for small and medium enterprise (SMEs). The company has first mover advantage in a large underpenetrated European SME market and we believe it should benefit from self-reinforcing networks effects driven by EU directives.