The Ashburton Global Strategy Fund returned +2.2% for May (the movement between net asset value at 29 April and NAV at 27 May). This return is slightly ahead of the strategic asset allocation measured on these pricing dates, although slightly behind the strategic asset allocation calculated for the calendar month, as a result of the weekly pricing effects.
Despite renewed tensions between the US and China, the rebound in global equity markets continued into June with an especially strong rally evident over the past week. This rebound in risk assets came on the back of positive sentiment, springing from the slow reopening of economies following the COVID-19 shutdowns. Another booster was increased optimism that a vaccine for the virus would be developed, as more companies move to the next phase of clinical trials.
Global equities ended May up more than 4%, with growth stocks still outperforming value stocks. Small caps had a very strong month and ended May up 7%. Emerging markets, however, ended the month only marginally positive, with gains being restricted on the back of large increases in COVID-19 cases in India and Brazil. The rise in numbers put increased pressure on both economies.
On the fixed income side, global government bond markets were broadly flat for May. Conversely, emerging market debt experienced a strong month, ending up nearly 6%, followed by US high yield, which ended up 4.5%.
Economic data from the US remains weak. The US unemployment rate reached its highest level in post-Second World War history during April and is expected to worsen even more in the June report. US GDP is also expected to fall further in the second quarter, as the country’s economic activity is not yet back to full capacity.
Forecast risk is high, and we believe market volatility will remain elevated, therefore we are retaining a cautious position. The Ashburton Global Strategy Fund is still underweight equities, property and bonds compared with the long-term strategic asset allocation. The fund has a corresponding overweight allocation to alternatives and cash. No changes had been made during the month to the tactical asset allocation.
The underweight exposure to equities detracted somewhat from the fund’s performance, although the overweight exposure to alternatives contributed positively.
Within the equities bucket, our core manager Epoch underperformed. This was mostly due to its lower exposure to the information technology sector, which continued to be the top performer for the month. The Ashburton Global Strategy Fund’s performance was, however, boosted by strong performances from both the Lyrical Fund and the Mundane World Leaders Fund.
Following Lyrical and Mundane, the third-largest contributor to the fund’s performance for May was the Aurum Isis Fund.
Despite the Ashburton Global Strategy Fund having an underweight position in property, the selected manager AB Asset Management outperformed the property benchmark for the month.
No changes were made to the underlying composition of the Ashburton Global Strategy Fund over the month. The fund continues to reflect the current macroeconomic house view of Ashburton Investments.