Quarterly Review Q1 2024 - Cautious Final - Flipbook - Page 5
Equities
Although equities only represent 30% of your Fund,
the exposure still proved additive over the quarter.
This was further supplemented by the Fund being
tactically overweight to Japan, which was one of the
strongest equity markets globally. Outside of Japan, it
was evident that “momentum” stocks were the primary
driver of equity market returns over the quarter. This
means that stocks that have done well recently, which
have typically been more growth-oriented stocks,
continued to perform well. Following this pattern, in
your portfolio the Amundi Russell 1000 Growth ETF
exposure in the U.S. component rose +12.3% over the
quarter. Other more growth-oriented exposures in
your portfolio like the BlackRock Continental Europe
Fund (+12.0%) and the Baillie Gifford Paci昀椀c Fund
(+9.6%) also outperformed their comparators by a
wide margin.
Conversely, those managers investing more in small
caps or value-oriented stocks were typically the
laggards, with funds like the Baillie Gifford Global
Discovery Fund (-9.8%), the Neuberger Berman US
Small Cap Value Fund (+5.4%) and the Pzena Global
Value Fund (+5.6%) lagging their respective index
comparators. With valuations of many large cap
growth/momentum stocks reaching what look like
highly elevated levels, we continue to believe retaining
deep and genuine diversi昀椀cation by style and region
remains entirely appropriate for your portfolio.
Fixed Income
Within the Fund’s 昀椀xed income component, we only
have a small exposure to Global High Yield bonds as
we don’t currently think the additional yield you receive
over the yields of government bonds suf昀椀ciently
re昀氀ects the prevailing economic risks. The high yield
focused manager we use here, MAN GLG High Yield
Opportunities Fund, delivered a +3.6% return over the
quarter. While it would admittedly have been better to
have a larger allocation, we remain comfortable not
stretching for yield and remain focused on a higher
quality 昀椀xed income portfolio at this stage in the
economic cycle. In this regard, the Fund’s holding in
JP Morgan China Aggregate Bond ETF, which holds
high quality Chinese bonds, returned +2.8% over the
quarter, bene昀椀tting from the ongoing de昀氀ationary
pressures in China. After a strong fourth quarter, the
Fund’s holding in iShares 20+ Year US Treasury ETF,
which invests in long dated US Treasuries, pulled back
-3.6% over the quarter as expectations for the pace
of rate cuts in the U.S. were tempered. Long dated
bonds typically perform best when future interest rate
expectations decline. From a portfolio construction
perspective, we like that if the U.S. economy were to
slow materially and interest rate cuts be accelerated,
this exposure will likely perform extremely well in
a period where equity markets may become more
challenged.
Property, Real Assets & Absolute Return
This diversifying component of your Fund proved highly
additive over the 昀椀rst quarter. Within the Absolute
Return component, the Fulcrum Thematic Equity
Market Neutral Fund was the standout performer,
delivering an +11.8% quarterly return. Fulcrum’s
strategy is to go “long” companies bene昀椀tting from
positive structural trends and “short” those that are
losing out. Examples would be the manager buying
companies bene昀椀ting from the breakthrough in
obesity drugs and going short the companies (such
as confectionary companies) that will see demand
negatively impacted by their increasing use. The
manager is also investing in companies they consider
to be AI winners and shorting those businesses that
will likely lose out from AI’s increasing prevalence.
Another notable performer in the Property & Real
Assets component was the AQR Managed Futures
Fund, which rose by +12.3% over the quarter. AQR
employ a trend following strategy and bene昀椀ted from
favourable trends in equity markets that persisted
throughout the quarter. Trend-following strategies
are largely indifferent to market directions, thriving
as long as the trend persists. This approach results in
a performance stream that differentiates itself from
other components of your portfolio.
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