Liontrust Multi-Asset Quarter in Review - Flipbook - Page 24
MPS Dynamic Beta
Another difficult quarter for markets saw all of our holdings in
negative territory, with concerns around potential recession in
a rising interest rate environment and ongoing war in Ukraine
weighing on sentiment.
however, with Artemis US Smaller Companies, Baring Europe Select
and Janus UK Smaller Companies among the worst performers
over the quarter. As ever, fears of imminent recession are having a
greater impact on domestically focused small caps.
Fixed income would usually be expected to provide defensive ballast
during equity sell-offs but bonds have not only become correlated
with shares in the short term, their performance has actually been
worse, particularly in the UK. A rising rate environment is clearly
difficult for this asset class, and our funds across the fixed income
spectrum struggled over the period; lack of bond exposure was
therefore a relative positive for our higher-risk models.
We added the Liontrust Diversified Real Assets Fund to the portfolio
in Q1 and it has continued to feature among the stronger performers,
providing the uncorrelated returns and inflation protection we were
seeking.
As highlighted earlier, we retain a lower duration position in our
fixed income allocation as central banks prevaricate over the timing
and extent of rate rises and tapering, and AXA US Short Duration
High Yield was among our better-performers in Q2.
With the value rotation continuing, our UK exposure via Fidelity
Index UK remains among the stronger performers, as the market
has benefited from its higher weighting to sectors such as financials
and energy. This was more than offset by our small-cap positions,
24 - Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2022
Another relative positive was emerging market exposure, which
had a better quarter than several other markets as Chinese equities
rallied on the back of authorities lifting the strict Covid lockdown
in Shanghai. Again, this helped short-term relative performance for
higher-risk models, which have considerable exposure to the region.
While the Chinese index has climbed almost 19% since falling to a
trough in April, the outlook for the world’s second-largest economy
remains subdued and commentators are questioning whether the
rebound is a mean-reversion to pre-lockdown levels rather than a
sustainable rally. For now, however, exposure via Fidelity Index
Emerging Markets was among our better contributors.