The CHF 1.95 billion Vontobel US Equity fund is continuing to overweight consumer staples, despite the sector's performance weakness in 2018.
Currently, 20.1% of the fund is invested in the consumer staples sector – an overweight of twelve percentage points compared with the benchmark, the S&P 500. However, this overweight has been reduced in recent months.
'This year, consumer staples have been the worst performers in the US. Many of these names have long been traded as a bond proxy,' said Ed Walczak, one of the fund's portfolio managers, in an interview with Citywire Switzerland's sister title, Citywire Deutschland.
'With interest rates rising slightly, investors have sold these stocks and invested in real bonds. This resulted in a sell-off of consumer staples. In addition, many investors have focused on more cyclical stocks.'
However, in these more volatile markets, Walczak urged investors to keep an eye on fundamentally good stocks in the consumer staples sector. 'Consumer staples will be more interesting to investors in the event of falling stock markets and a slow but certainly weakening economy,' he said.
New portfolio addition
The fund, which is also managed by Citywire A-rated Matthew Benkendorf, invests more than 25% in the consumer discretionary sector – its largest overweight and well above the 12.5% allocation in the benchmark.
'The overweight in consumer discretionary stocks has been around for some time. But we change our stock selection and sell stocks that have gone strong and achieved their goals. We are very disciplined,' Walczak said.
For example, the fund recently bought Royal Caribbean Cruises, the world's second largest cruise company with 44 ships and a market share of 25%.
'All in all, the first quarter of this year was very intense for us, which is quite unusual for our strategy. But the flash crash in February has given us many opportunities,' Walczak said.
'Some names at the start of the year went extremely well. We sold them consistently when we reached the price target.'
As of May 2018, the fund had achieved returns of 45.7% over three years, performing well above the sector average of 31.1%. It sits 24th out of the 224 Citywire-tracked funds in its category.