Global Strategy Fund: July 2020

Summary

The Ashburton Global Strategy Fund returned 4.4% for June, (this is the movement between the NAV as at 27 May and NAV at 24 June). This valuation reflected strong performances from the majority of the Fund’s building blocks between these two pricing dates, although some of the performance was given back during the last few trading days in June, when markets pulled back slightly.  
    
For the June calendar month however, the exposure to alternatives and cash were a drag on performance given a rally in risk assets. However, all the components in the alternatives bucket contributed positively to the June and second quarter performance.  

Within the equities bucket, Mundane outperformed the benchmark for the calendar month while Epoch and Lyrical lagged somewhat.  For the quarter however, Lyrical has been the strongest performer, posting a return in excess of 28%, whereas Mundane ended the month in line with the benchmark.  The core equity manager, Epoch, underperformed during the quarter, mostly due to the combination of an underweight exposure to the information technology sector, and dividend paying stocks being negatively impacted by the COVID-19 pandemic.

The property manager, AB, outperformed its benchmark for the month as well as over the quarter.

For the calendar month, both fixed income managers, Colchester and Franklin Templeton, ended slightly behind this asset class benchmark.  Colchester is however comfortably ahead of the benchmark for the quarter, whereas the Franklin Templeton Global Total Return Fund has lagged.

Risk-on sentiment continued into June. It was boosted by the extensive stimulus being provided by central banks and governments across major economies. Markets seemingly shrugged off concerns about a second wave of infections as some economies slowly started reopening. Risk assets such as equities, credit and even global listed real estate enjoyed a strong month and quarter. Emerging markets however outshone their developed markets counterparts, with the Chinese equity market ending the month of June up nearly 10%.  

Despite a continued increase in COVID-19 infections in the United States (US), and the infection rate not yet being contained in many emerging markets such as India and Latin America, US equities rose by about 20% and emerging market equities by 18% for the quarter.   

Global equities, as measured by the FTSE World Total Return Index, returned 3.2% for June and 19.3% for the quarter. Despite a strong second quarter, the index is still down 6.1% for the year to date.

Government bonds held up relatively well, posting a positive return of 0.9% for June and 3.3% for the quarter. For the year to date, the FTSE World Broad Investment-Grade Bond Index (WorldBIG) was up 3.6%.  

The Ashburton Global Strategy Fund reflects the macroeconomic house view of Ashburton Investments.  From a tactical asset allocation perspective, the Fund currently has a neutral position in equities compared to its long-term strategic asset allocation. I n June it moved even more underweight real estate equities, but its exposure to cash increased slightly as a result.