30 April 2020
The Fund rose by 6.55% in April, ahead of its performance comparator of cash + 5%, which rose by 0.45%. It was also ahead of the FTSE 100, to which all the underlying strategies are linked, which rose 4.04% over the month.
The UK stockmarket recovered some of its losses in April following the collapse in March due to the Coronavirus, with the FTSE 100 reaching a closing level of 5,901.21 on the 30th April, a rise of 18.17% since the lockdown was announced on 23rd March. Unsurprisingly the virus was the dominant topic throughout the month, but with little factual data to go on investors waited nervously for concrete information to base their decisions on.
One thing that was widely anticipated was a significant drop in future dividend levels as many companies were no longer generating the same levels of cash flows as previously, if at all. Just how much they would be cut was a matter for speculation, however, and as expected future dividend levels form a large part of the pricing of derivative contracts many of the investment banks were very conservative in their pricing, with some reluctant to price at all.
The Fund continued to see positive inflows during the month but given what we regarded as poor pricing in the market we decided to hold tight, waiting for better opportunities in the future. One strategy passed its first observation point in the month, but with a kick-out level of 7,459.88 it did not mature, moving on to its second observation point. This strategy would now produce a potential return of 39.4% from its end of month value if it were to mature on its next observation date. That’s 39.4% for a rise in the FTSE 100 index of 26.4%, with a falling observation level in each year thereafter, which continues to show the intrinsic value within the fund during these volatile times.
To view all the strategies within the fund in detail, please visit the portfolio page on www.UKDSF.com.
The Lowes UK Defined Strategy Fund is a sub-fund of the Skyline Umbrella Fund (ICAV) and is regulated by the Central Bank of Ireland. The KIID, Prospectus, and Supplement can be accessed by visiting UKDSF.com/literature and are only available in English.
Lowes Investment Management Ltd, Fernwood House, Clayton Road, Newcastle upon Tyne, NE2 1TL. Authorised and regulated by the Financial Conduct Authority.