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Summer Storms

The past month has certainly seen volatility return to financial markets most notably to equities.  The Euro Stoxx index, which is a broad basket of Eurozone shares, saw a drop of over 16% from peak to trough during the month of August, before subsequently recovering part of the decline.  Most other equity markets experienced similar gyrations. This volatility was triggered by events in China where recent routs in stock prices were then followed by policy actions which raised concerns over the underlying health of the Chinese economy.  

The Chinese Central Bank devalued the local currency, the Yuan, and opened the door for further currency weakness and also cut interest rates.  Some analysts saw this as a panic response to weaker Chinese economic data and raised concerns over how weak the economy might actually be, and what impact it would have on global growth and global corporate profits.  It was always our view that the Chinese economy would see some slow-down from its 7% growth rate as we outlined at the Appian Investment Seminar last March. We remain vigilant and continue to monitor the economic prospects in China as the authorities seek to transition the economy from investment-driven, to one where the consumer and domestic demand play a greater role.

Elsewhere during the month we saw further evidence of a better US economy with the economy showing a growth rate of 3.7% for the second quarter and continued signs that the consumer is returning to more normal spending patterns. This improving economic picture points to some increase in US interest rates before the end of the year unless concerns over the Global economy prompt the US Central bank to stay their hand.

How were we positioned in Appian for these market conditions?  In recent months we had grown more cautious on markets, and had reduced our weighting to equities close to the lower end of our range. Our Value Fund for example currently holds about 35% exposure to equity markets – at the turn of the year this figure was in the mid 40’s. We also currently hold just under 30% of the fund in cash. This highlights the benefit of our dynamic approach to asset allocation and provided us with a buffer against the extreme market volatility and also ample fire power should we see opportunity in markets. Within our equity funds we also have ample cash, should opportunities arise and the underlying quality of our selected stocks, where we emphasise factors such as solid financials, superior cash flow and well covered dividends, ensures that they hold up better than average portfolios in times of stress. Our underlying equity performance in August was superior to the market average and we continue to deliver returns with a lower level of volatility or risk.

So while our funds did see a slight dip in the month – the Appian Value Fund slipped by 3.1% - this was a significantly better performance than standard Irish managed funds many of which lost over 6% in August.

Appian Funds are still showing very healthy returns so far this year with the Value Fund up by 4.5% and the Equity Fund and the Small Companies Opportunities Fund up by 9.7% and 22.7% respectively.

WARNING: The value of your investment may go down as well as up. Past performance is not a reliable guide to future performance. These investments may be affected by changes in currency exchange rates.

Appian Asset Management is regulated by the Central Bank of Ireland. No part of this document is to be reproduced without our written permission. This document has been prepared and issued by Appian Asset Management on the basis of publicly available information, internally developed data and other sources believed to be reliable. It does not constitute an offer or an invitation to invest, or the provision of investment advice. No party should treat any of the contents herein as advice in relation to any investment. While all reasonable care has been given to the preparation of the information, no warranties or representation express or implied are given or liability accepted by Appian Asset Management or its affiliates or any directors or employees in relation to the accuracy fairness or completeness of the information contained herein. Any opinion expressed (including estimates and forecasts) may be subject to change without notice. 

Appian Unit Fund Prices  
1 September 2015 

Appian Value Fund 137.55 

Appian Equity Fund 160.13 

Appian Small Companies Opportunities Fund 180.59 

Appian Liquidity Fund 106.43

Appian Ethical Value Fund 96.04

For more detailed information on each of our funds click here

Patrick J Lawless
Managing Director
John Mattimoe
Head of Equity Analysis
Eugene Kiernan
Head of Investment Strategy
Gareth Henson
Portfolio Manager
Pat Kilduff
Head of Economic Analysis
Frank O’Brien
Click here for more information about our Investment Team
John Flavin
Senior Relationship Manager
Tel: (01) 662 4053 direct
Click here to email John
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