Liontrust Multi-Asset Quarter in Review - Flipbook - Page 26
MA Active
Another difficult three months for markets saw most 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.
As we highlighted earlier, 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.
The current SAA on our MA funds maintains a large weighting to
UK gilts for the Reserve and Moderate offerings and although this
weighting has fallen significantly (bringing overall duration down),
it continues to have an outsized impact on overall performance.
With the value rotation continuing, our equity holdings skewed
towards that end of the market were the top performers over
the period but even these struggled amid widespread volatility.
Stronger contributors included Artemis Income, Man GLG Japan
CoreAlpha, Liontrust European Dynamic, Evenlode Income,
JOHCM UK Dynamic and Ossiam Shiller Barclays CAPE US
26 - Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2022
Sector Value, an ETF based on Shiller’s CAPE (cyclically adjusted
PE) metric and skewed towards the four most undervalued sectors
on a monthly basis.
While our value skew was positive on a relative basis, it was more
than offset by weaker performance from growth, quality and smallcap positions, with holdings such as Baring Europe Select among
our hardest-hit holdings over the quarter. As ever, fears of recession
are having a greater impact on domestically focused small caps.
Another relative positive was emerging markets 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. This helped 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, funds including BlackRock
Emerging Markets, Vontobel mtx Sustainable Emerging Market
Leaders, Fidelity Asia Pacific Opportunities and Federated Hermes
Asia ex-Japan Equity were among our better performers.