The strong market rally of the first quarter persisted last month. The fund earned a return of 5.0% in April. The fund does not have a performance benchmark. The industrial, consumer discretionary and technology sectors made the largest positive contributions. A negative contribution to the return came from healthcare.

Kion Group, Valeo and Microsoft accounted for the largest contributions to the performance. Kion published strong first quarter figures in its Supply Chain Solutions segment, with growth of 52% in the order book and 21% revenue growth. The equity price of Valeo rallied after it reported outperformance versus the general automotive industry in the first quarter. Microsoft briefly enjoyed a market capitalisation of over $1 trillion due to persisting growth in the cloud business in the third quarter of 2018. Contrary to expectations, the traditional server business continues to grow steadily.

AstraZeneca, Roche and Novo Nordisk made the largest negative contributions. Pharmaceutical equities were weak as a result of sector rotation driven by potential new legislation in the US. Market sentiment surrounding AstraZeneca remained negative in the wake of an equity placement in March for the further development of cancer treatment medicine DS-8201. Roche was weak in spite of improving its outlook for 2019.

Lonza Group, a globally-operating life sciences company, was included in the portfolio in April. The company develops and manufactures pharmaceutical ingredients aimed at improving the health of consumers. Lonza is attempting to become market leader in quality and reliability, innovation and organic ingredients.

Pharmaceutical companies increasingly make use of companies such as Lonza in their production processes. This is partly due to growing complexity and corresponding costs. Long-term partnerships and joint ventures with specialist companies are a solution here. Examples include the joint ventures Lonza has with companies such as Sanofi and Chr. Hansen.

With a view to being a winner tomorrow, Lonza is leading the way in the development of medicines and ingredients for the future. Examples include investment in cell and gene therapies and micro-organisms. There are only a handful of companies that can do this, placing Lonza in an attractive position.

Lonza is an excellent operator that scores outstandingly well in terms of corporate governance, anti-corruption and human capital development.

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What kind of companies do we seek?
We seek profitable companies undergoing structural growth that will create shareholder value in the long term alongside a clear social mandate.

The best results are achieved if the interests of all the stakeholders are aligned. This requires not only products and services but also operations to be in line with the wishes and requirements of society (licence to operate).

Moreover, the companies need to have sufficient opportunities for growth to be able to invest at an attractive return (innovation and expansion).

In order to sustain earnings growth over the long term, companies need to enjoy sustainable competitive advantages compared to existing and new competitors (strong strategic position).

The role of management
We expect management to pursue a long-term strategy in addition to conducting sound day-to-day management. The risks and opportunities relating to ESG need to be clearly incorporated, backed up bysensible investment plans that respond to long-term trends and match the company’s strategic positioning and growth opportunities.

Quality and valuation
We believe the selected companies are above-average quality in terms of strategy and operations and are capable of creating long-term value for all stakeholders. Depending on the absolute valuation of their equities, they could form an interesting long-term addition to the portfolio.