Multi-Asset Funds: August 2024

10 September 2024

Global equity and bond markets climbed higher in August predominately supported by relatively dovish monetary policy rhetoric from Fed Chair, Jerome Powell, in his speech at Jackson Hole. 

It is worth noting that Powell acknowledged that labour market conditions have cooled from their overheated state, particularly over the last six months. Given the recent focus on prospective monetary policy decisions having an increased weight toward developments in the labour market, this likely sets the scene for a federal funds rate cut at the next Federal Open Market Committee meeting. Special mention was also made to the committee’s growing confidence that the inflation rate will trend back to the 2% target while maintaining relatively upbeat labour market conditions by historical standards. It was also mentioned that there is sufficient policy manoeuvrability to respond to weakening labour market conditions that are undesirable. This likely hints at deeper federal fund rate cuts if labour statistics meaningfully deviate from the committee’s economic projections. 

Recent inflation statistics out of the US have been encouraging with CPI and PPI releases both surprising to the downside relative to Bloomberg consensus expectations in the July release. Similarly in the UK, inflation has also recently surprised to the downside and the Bank of England has now commenced on a rate cutting cycle by reducing the bank rate by 25bps to 5% in August. Conversely, however, CPI recently surprised to the upside in Japan. While prospective tightening monetary policy conditions in Japan has certainly caused some market jitters, the Deputy Governor, Shinichi Uchida, has assured markets that policy rate increases are unlikely if capital and financial markets are unstable.

Overall, global economic indicators are indeed slowing, but not enough to call for a recession just yet. Accordingly, this has translated into defensive sectors outperforming, likely due to relatively more inelastic earnings prospects compared to their cyclical counterparts.  

Fund strategy

From a security selection perspective, we remain positioned in selected opportunities within our internal equity building blocks consisting primarily of Ashburton’s Global Leaders and Global Equity Growth Funds. Themes such as the emergence of Artificial Intelligence (AI) and a potential recovery in China are on our radar.

China’s equity market performance has faltered recently, and we have reduced emerging market exposure for risk management purposes. Nevertheless, we remain encouraged by even further accommodative monetary policy supportive measures. Overall, multiples remain low in the country and international investors are generally very underweight in the region. We remain acutely aware that both investor positioning and multiples historically change rapidly once confidence returns.

Along with emerging markets, we have also reduced positioning in Europe in favour of high dividend and low volatility exposures in the US as sectoral and style leadership changes have emerged in broader markets. This has been a relatively welcomed diversifier. While we are encouraged by a potential federal funds rate cutting cycle in the US, we believe markets are a little too optimistic over the magnitude of the prospective easing cycle; hence reducing some fixed income exposure recently. Accordingly, we prefer to have an allocation toward US T-bills that still offer an attractive yield of close to 5%.  

Fund performance

The USD Global Growth Fund climbed 1.8%[1] while the USD Global Balanced Fund increased 1.6% compared to its Morningstar peers which rose 1.7% for both categories. While our sizeable position toward global equities added value over the month, our primary internal equity building blocks, the Ashburton Global Equity Growth and Global Leaders Funds, lagged their Morningstar peer groups. Each respective strategy maintains a healthy long-term track record. While our underweight to fixed income was a slight detractor, we remain positioned slightly higher up along the fixed income curve in selected regions such as Germany and more toward the belly in the US, which added value over the month. Overall, both multi-asset funds remain in the second quartile in the Morningstar category year-to-date.

Disclaimer:

Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is Issued by Ashburton Fund Managers (Pty) Limited (The Investment Manager) (Reg number 2002/013187/07), which has its registered office at 3 Merchant Place, 1 Fredman Drive, Sandton, 2196, South Africa and is an authorised financial services provider (FSP number 40169), registered with the Financial Sector Conduct Authority (FSCA). In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), of the same address. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the  portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Fund Managers (Pty) Limited is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. Additional information about this product, including brochures, application forms and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com.