March was another very tough month for equity markets, with the spread of Covid-19 across the world weighing heavily on sentiment. We are starting to see multiple incidences of companies withdrawing their full year guidance and suspending or cancelling dividends. The Trust continues to hold up well in this environment on a relative basis, although we have seen significant declines on an absolute basis.

As a general comment, we are holding up reasonably well due to our higher-than-average exposure to high quality, defensive businesses and lower-than-average exposure to highly-levered, cyclical companies. During March for example, we saw significant positive contributions from our positions in Novo Nordisk, Grifols and Roche; all three stocks ended the month up in absolute terms. All three of these companies are haven’t seen significant operational disruption from the current economic environment. We also saw strong performances from Prosus and Delivery Hero. Prosus has benefitted from its large holding in the Chinese internet giant Tencent. Tencent has significant gaming exposure and the early evidence from the crisis, is that gaming activity is picking up during periods of lockdown. Delivery Hero, the takeaway delivery platform, has seen a pick up in the number of restaurant sign-ups.

We have also, of course, had a number of positions that have been very negatively impacted in the current environment. In fact, just about anything we own related to financial services has struggled. For example, holdings in Credit Agricole, Unicredit and Munich Re have all been detrimental to performance.

During the month, we made a few moves to sell positions that we believe have been significantly impacted by the current Covid-19 related crisis. For example, we sold ADP, the French airport operator, and Legrand. We used the money raised to add selectively to existing holdings that we feel are likely to be structural beneficiaries of the current environment.

We are confident in our positioning and will continue to retain balance in our exposures by considering two types of business for investment; those where we see high and sustainable returns that are undervalued by the market and those companies where we can see a material improvement in medium term business prospects.

Glossary

Absolute terms: describing any measurement used without reference to other measurements

Cyclical companies: Companies that sell discretionary consumer items, such as cars, or industries highly sensitive to changes in the economy