Consumer and healthcare drives Alliance Trust fund to outperformance

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Overweight positions in the consumer staples and healthcare sectors has helped Alliance Trust Asset Management’s European Equity fund outperform its benchmark by 8.9 percent.

Fiona MacRae, who manages the Alliance Trust European Equity fund with co-manager Tommy Bryson, says its overweight exposure to consumer staples and healthcare holdings have driven outperformance after performing strongly in spite of recent market conditions.

MacRae explains: “Against a backdrop of European volatility, our overweight balance in consumer staples and healthcare has reaped awards for the fund’s continued strong performance. Many of these companies have been flourishing against a re-rating market environment as investors.”

She says the fund’s performance is due in part to a re-rated market and reports positive returns are due to strong stock corrections such as the Spanish supermarket chain, Distribuidora Internacional de Alimentación (Dia), part of the Carrefour Group.

The manager says: “Spain is a difficult market, we own a company called Dia, it’s a discount store, it’s core markets are Spain, Portugal and France. We think the longer term outlook for it is good because even in Spain people are trading down, you can see it here [in the UK] as well if you look at the stats the discount chains, the Aldis and Lidls are doing well. It’s the same in Spain. People are being much more careful about how they spend their money.”

MacRae also highlights recent comments by European Central Bank president Mario Draghi, who earlier this year made a pledge to do “whatever it takes” to prevent the eurozone from collapsing under the weight of soaring government borrowing costs.

She says: “The president of the ECB made a statement earlier this year basically saying that he would do anything it would take to save the euro. I think that definitely has a line in the sand in terms of European equity markets because before that people were really pricing in a break up of the euro.

“The markets have recovered slightly on the back of that. He [Draghi] has taken away the tail risk of a break up of the euro.”

MacRae believes there are better prospects and opportunities in Europe for investment despite the economic outlook and risks.