Multi-Asset Funds: January to March 2025

08 April 2025

This year has certainly been characterised by immense uncertainty in global markets.

Global equities declined over the quarter, with the MSCI All Country World Index falling 1.2% and the S&P 500 declining by 4.3%. The primary reason for the downturn can be ascribed to a valuation multiple de-rating in the United States (US), driven by a confidence shock among global investors. The imposition of tariffs by the US on major trading partners, along with retaliatory measures, has not only undermined the theme of US exceptionalism but also created uncertainty for businesses. This haphazard implementation of tariffs has left many companies unsure of how to manage their day-to-day operations, as reflected in several confidence surveys over the quarter. 

While high-frequency data in the US has slowed in 1Q25, it has not yet reached recessionary levels. However, elevated policy uncertainty has been sufficient to trigger a potential growth scare, with global bonds being a primary beneficiary due to their safe-haven appeal. As a result, the FTSE World Broad Investment-Grade Bond USD Index climbed 2.8% in Q1.

At the recent Federal Open Market Committee (FOMC) meeting, the decision to keep the federal funds target range unchanged at 4.25% to 4.5% was unanimous. However, there were significant developments in balance sheet policy and economic forecasts. The Federal Reserve (Fed) decided to slow the pace of its balance sheet runoff by reducing the monthly redemption cap for Treasury securities from $25 billion to $5 billion. Additionally, economic growth projections were revised downward across the forecast horizon, while personal consumption expenditure inflation forecasts were raised for this year and 2026. During the press conference, Fed Chair Jerome Powell emphasised that the committee considers the impact of tariffs on inflation to be temporary.

Outside the US, market participants have shifted their focus to regions such as Europe and China. The MSCI Europe and China Indexes posted robust returns of 10.8% and 15.3% in USD, respectively in Q1. Valuations in Europe are attractive, and there are early signs of a recovery due to stronger wage growth, prospective fiscal stimulus and a positive shift in sentiment toward the region.

In emerging markets, we are encouraged by significant easing in monetary policy dynamics and recent fiscal measures. Notably, investor interest in the Chinese technology sector has been revitalised by a groundbreaking innovation from the Artificial Intelligence (AI) company DeepSeek, which recently released an open-source large language model at a significantly lower cost compared to other renowned models like OpenAI’s ChatGTP-4. Overall, policies aimed at restoring consumer confidence, addressing the credit profile in the debt-ridden property sector, and promoting a sustainable turnaround in credit extension will be crucial for lifting potential economic growth.

In other Asian markets, the Nikkei 225 declined by 10% in local currency terms (-5.6% in USD) due to tighter monetary policy dynamics that led to a de-rating of the region’s valuation multiple and a softening in Earnings Per Share (EPS) growth. Meanwhile, in the UK, the market has benefited from a favourable defensive sector composition due to heightened geopolitical uncertainty.

Overall, we remain vigilant about policy uncertainties stemming from the Trump Administration and their potential negative secondary effects on long-term growth outcomes.

Fund strategy

From a security selection perspective, we have strategically positioned ourselves in selected opportunities within our internal equity building blocks, primarily comprising of the Ashburton Investments Global Leaders Equity and Ashburton Global Equity Growth Funds. In early October, Morgan Stanley Investment Management (MSIM) assumed management of the Global Leaders Equity Fund. MSIM has an exemplary long-term track record for selecting high-quality companies that compound their intrinsic value over time. The Global Equity Growth Fund focuses on selecting stocks with high free cash flow prospects.

From an asset allocation perspective, we have recently chosen to de-risk some of our equity positions, particularly in the US, to preserve gains made in recent quarters. We remain selectively positioned in the fixed income market as we are mindful of a potential growth scare, however, T-bills remain attractive where yields remain above 4% without significant duration risk. There is heightened uncertainty about the path of global inflation and the potential fiscal and monetary actions in the US. To hedge against these uncertainties, we have also added some gold and commodities to the SICAV Multi-Asset Funds.

Fund performance

The USD Global Growth Fund declined by 0.7%[1] over the quarter, while the USD Global Balanced Fund was flat. These results were in line with their Morningstar peers, which fell by 0.7% and rose 0.2%, respectively. Our strategy of de-risking cyclical equity positions, particularly in US markets, and shifting towards more defensive assets through Exchange Traded Funds (ETFs) like the S&P 500 High Dividend and Low Volatility ETF, added value over the quarter. Additionally, we took profits in convertible bond and high yield exposures due to rising geopolitical risks toward the end of the quarter. We also increased our gold holdings, raised cash, and added global fixed income positions, primarily in the global sovereign bond market. Within our internal equity building blocks, the Ashburton Global Equity Growth Fund declined by 4.9%, but this was partially offset by a 2.9% increase in the Ashburton Global Leaders Equity Fund, which benefited from exposure to companies with relatively low operating and financial leverage.

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 acompany 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).The funds are authorised in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF). The fund does not distribute; it accumulates. 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 is 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. The Management company has the right to terminate the arrangements made for Marketing. Additional information about this product, including brochures, prices, application forms, Prospectus, KIID and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com