UK & EU – For professional and institutional investors only
Switzerland – this is an advertising document for professional and institutional clients as defined by the Swiss Financial Services Act only
Despite another month in which inflation numbers moderated, risk assets struggled as central banks reiterated their hawkish rhetoric and commitment to staying the course in taming inflation, which remains highly elevated. This was possibly best illustrated by the dot plot increasing in spite of the softer print.
Elsewhere, the big news came out of Asia, where China stepped up their relaxation of Covid curbs and Japan adjusted Yield Curve Control, widening the target band to 50bps on the 0% 10 year yield target.
The Fund decreased by 1.3%.
No investments called during the month.
The GRY available to investors increased once more. The terminal value of the current investments stands at 33.7% in the event markets annualise at 0% in price terms over the next three years. GRYs remain highly attractive even in equity markets that fall significantly.
The Fund decreased by 6.5% over the year, against a decrease in global equities of 17.7%. The Fund’s sensitivity to its underlying equity exposures remains within target before the protection overlay is taken into account.
As the dust settles on 2022, it will go down as perhaps the year in which irreparable damage was done to the 60/40 investment philosophy as a stand alone, all weather strategy for all times. And, more importantly, that asset allocations consisting purely of bonds and equities are not suitable across risk profiles. That is certainly not to say that the 60/40 portfolio will not have its day again, it will. The question is when. But, given correlations, and what has been seen this year as the result of markets beginning to be weaned from the performance enhancing drugs they have enjoyed for so long, there can be no argument over its fitness in isolation.
Given the price action seen in the first part of the New Year, it would seem the narrative has shifted to one of the Fed having manufactured a soft landing perfectly. Of course this is possible, but less likely than the options either side that they have either done too much already, leading to a hard landing, or not enough and, as the central banks themselves remain keen to point out, more is needed to tame the stickier aspects of inflation, namely wages. In either of the latter scenarios, equity is likely to struggle to annualise above meagre returns for the foreseeable future, and investors need to seek ways to achieve meaningful returns from other sources.
|Hong Kong 50||-12.7%||6.4%|
|US Equity Income||-18.4%||-5.9%|
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