World equity markets started their recovery process, having experienced a significant ‘peak to trough’ drawdown of 26%[1] in Q1 this year following the rapid global spread of COVID-19. Accordingly April saw global equities return 8.9%. The most significant contribution to this rise came from US equities, with the S&P 500 rising 11.2%. Global smaller companies, as measured by the MSCI Word Small Cap index, rebounded by a similar 11.8%, though even more marked was the impact from technology focused names, with the NASDAQ rising 13.8%[2]. Equity markets have since gone on to compound those returns in May, with some individual stocks, depending on their underlying business models, fully regaining their losses.

Sovereign fixed income markets have been more stable, with yields generally falling, following the earlier yield spike. US treasuries were essentially flat on the month, as measured by the Bloomberg Barclays US Treasury Total Return index[3]. Global High Yield bonds, having suffered heavily during the sell-off, rose by 4.3%[4]. Global investment grade bonds also performed well, with the spread between those and government bonds tightening, reflecting improving confidence around the risk profile of corporate debt (relative to government debt).

Global commodities saw mixed performance, with precious metals performing well, though agricultural commodities negatively. Oil prices fell due to ongoing weak demand and limited storage capacity. In currency markets, ‘cable’ (the sterling/dollar rate) was broadly flat on the month, with sterling having seen a significant drop, and subsequent partial rebound in March. US dollar strength vs. sterling on a year to date basis (as at 28 May)  is particularly marked when looking at the S&P 500 return over the same period, which is now positive for UK based investors.

This subsequent reaction by financial markets to the initial sell off has been shaped by a combination of substantial policy response, a return of some investor risk appetite, clear signs that painful measures to contain the virus’ spread have worked, and periodic positive vaccine development newsflow (albeit from a low base). These have all been against a backdrop of heavily deteriorating economic indicators and joblessness numbers. Growth numbers are likely to significantly worsen from the, for example, US Q1 GDP number of -4.8% and corporate earnings are equally likely to deteriorate over the reminder of the year.

The equity market in particular seems to be discounting the negative news and appears to be focused on a 2021 recovery, the shape of which is still debatable. The role the US Federal Reserve is playing in both support for the US (and to some extent global) economy and financial markets is vital and Jerome Powell, the Fed’s current Chairman, has been clear recently that the Fed remain committed to supporting the (US) economy and will use their full range of tools to continue to do so.

The ability for equity markets to hold their recent gains is not without risk, particular in the context of the still high annualised total return for world equities, since the end of the global financial crisis, of 13%[5], substantially above most investors’ long-run equity return expectations.

Performance and activity

Over April the fund’s Net Asset Value (NAV) rose 3.0%, and the share price rose 16.0%.  The Company’s Association of Investment Companies (AIC) Flexible Investment peer group returned  6.6% in share price terms. The FTSE World Total Return Index, which the Company aims to outperform over the long-term, returned 8.9% in sterling terms.  The Company’s NAV is down 10.1% for the year at end April 2020 (FTSE World Total Return, -8.8%)[6].

The best performing sector for April was the public equity exposure sector which contributed 2.2% to performance, and with all holdings positive for the month. Our Euro Stoxx dividend future strategy led performance, followed by Sigma Capital Group. Also performing well was the Worldwide Healthcare Trust. Burford Capital, the listed ligation funder, heavily marked down in 2019 due a well-publicised short attack on it shares, also performed positively, noting to the market that it expected to see high demand for its services given the current economic situation.

The portfolio’s private equity allocation, which contains both listed and unlisted names, was also a positive contributor. Safeguard Scientifics and Augmentum Fintech were the principal contributors. The former remain committed to maximising the value of their portfolio of interests and returning proceeds to shareholders and they announced in April the appointment of a Chief Restructuring Officer, which appears to underline their intent to return capital in a sensible manner.

Commodities performed well with our Bank of America Merrill Lynch allocation adding .3% to performance.

The credit and property allocations marginally underperformed for the month. Within the latter, Ceiba Investments was the principal detractor to performance, being impacted by negative portfolio news (with regard to COVID-19 related commerce and tourism impact in Cuba) and the consequent suspension of its 2020 dividend.

Limited trading activity was undertaken in the month, and we are not adding longer term horizon investment strategies in light of the Board’s commitment to bring forward to shareholders a realisation investment policy. Equally we have been keen to participate in the ongoing rally in risk assets, through our existing portfolio, and have maintained all allocations. Within our illiquid private equity portfolio we are unlikely to know the full extent of the impact on valuations until mid-summer. Indeed this is also the case with regard the underlying portfolios in our listed private equity names. As such we continue to take a patient approach with these names.


Sovereign fixed income: fixed income instruments issued by the government

Yield: The level of income on a security, typically expressed as a percentage rate.

Investment grade bond: a rating that signifies the bond presents a relatively low risk of default

Net Asset Value (NAV): The total value of a fund's assets less its liabilities

Illiquid private equity: equities that cannot be easily bought or sold in the market


[1] FTSE World Index, in Sterling and total return terms. Refers to period 20/2/20 – 23/3/20. Source, Bloomberg.

[2] Global equities refer to FTSE World Index, all returns quoted on total return and in Sterling terms, source Bloomberg.

[3] Unhedged, USD terms

[4] Bloomberg Barclays Global High Yield Total Return Index unhedged

[5] FTSE World Index, in Sterling and total return terms. Refers to period 27/2/09 – 28/5/20. Source, Bloomberg.

[6] Sources: Morningstar, Bloomberg, Janus Henderson.