31 February 2020
The Fund fell 3.81% during the month, outperforming the IA Flexible Investment sector average which fell 4.67%.
Equity markets initially proved resilient to the news regarding COVID-19, with a sharp rebound even being seen in Asian markets such as the Hang Seng. As the virus continued to spread, particularly outside China, the death toll unfortunately rising, investors finally began to flee. Equity markets ended the month down heavily as a wave of fear set in that the precautions being put in place would have an unquantifiable impact on the global economy, be it a short-term shock or a longer lasting event.
Whilst government bonds provided some protection against falling equity markets the same could not be said for investment grade which saw their credit spreads widen. This was more pronounced in high yield bonds, which in times of market stress will typically find themselves more correlated to equity market movements.
As the outlook deteriorated the Fund was positioned more defensively. A FTSE 100 linked structured note matured during the month, delivering an attractive return of 11.58% after one year, outperforming the underlying index which delivered a total return of 7.75%. Proceeds were held in cash. During the month our allocation to long/short equity funds placed us in good stead and we increased our exposure by reducing our position in US equities. We also reduced our Asian equity exposure in favour of a short dated corporate bond fund to provide downside protection should it be required, with markets having the potential to be more volatile moving forward.
This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.
The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.
The Fund is suitable for investors who are seeking to achieve long term capital growth.
The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.
Past performance is not a guide to future performance.