Market Commentary
April saw a continuation of themes from the March quarter. Inflation repeatedly surprised to the upside and saw central banks rapidly move towards raising short term interest rates. The Ukrainian crisis has yet to be resolved, creating further risks to economic growth and supply chains globally. Whilst many markets began removing restrictions related to the Covid-19 pandemic, China has begun to impose tighter restrictions as Omicron takes hold there, creating further disruption.
Against this market backdrop, global equities markets delivered significant negative returns. The worst affected stocks were some of the major beneficiaries of the pandemic lockdowns, as demand for…
Market Commentary
April saw a continuation of themes from the March quarter. Inflation repeatedly surprised to the upside and saw central banks rapidly move towards raising short term interest rates. The Ukrainian crisis has yet to be resolved, creating further risks to economic growth and supply chains globally. Whilst many markets began removing restrictions related to the Covid-19 pandemic, China has begun to impose tighter restrictions as Omicron takes hold there, creating further disruption.
Against this market backdrop, global equities markets delivered significant negative returns. The worst affected stocks were some of the major beneficiaries of the pandemic lockdowns, as demand for their products now returns to prior trends.
Portfolio Performance
The Global Equities Fund delivered a gross return of -7.11% during April, underperforming the fund’s market index return of -3.90%.
For the 12 months to the end of April 2022 the Global Equities Fund delivered a gross return of -15.17%, underperforming the fund’s market index return of +1.53%
Share price falls in our holdings of Netflix, Amazon, Pay Pal, Walt Disney, Salesforce and Alphabet drove our relative under-performance.
Outlook
Europe and Asia appear to be the worst effected from an economic growth perspective. Some economists debate the usefulness of higher interest rates when it is supply, rather than demand, that is the root of rising prices. It is clear however that rising prices are everywhere, wages are beginning to respond, and surveys of expected future inflation are drifting higher, forcing the central banks to respond.
Whilst consumer and technology stocks have been some of the worst performing stocks on the above economic growth concerns, we continue to believe many of these companies remain positively exposed to a post vaccination economic reopening, and have attractive long term fundamentals. The price falls only make companies exposed to this theme, such as Amazon, Comcast, Fiserv, Nike, Ryanair, Uber Technologies, Visa and Walt Disney more attractive, in our opinion.
Other key investment themes across our portfolio include: stocks with pricing power – denoted by strong brands and industry structures - to help combat near term inflation; digitalisation through the Fintech sector disrupting the incumbent financials; energy transition to reduce Co2 emissions; and connected healthcare - using data analytics to improve health outcomes.
The funding of our two new global equity managers to create a multi manager product (combined with our current portfolio) will begin in May. We look forward to being fully invested with them over the next four to six weeks.
We actively manage the fund’s foreign currency exposures. As at 31 April 2022, the fund’s foreign currency exposures represented 97.47% of the value of the fund. After allowing for foreign currency hedges in place, approximately 46.24% of the value of the fund was unhedged and exposed to foreign currency risk.
