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THE INVESTOR
S
hort-term moves in equity markets
were largely driven by US data and
its impact on market perception as to
when tapering would start. Initially the
shutdown of the US government suggested
no imminent onset, while more recent
data have increased the chance of more
immediate action. Data in the UK were
generally strong, bolstering hopes that a
sustained robust recovery was under way.
One consequence of this was a signi cant
strengthening of sterling, which will
negatively impact the translation of foreign
currency dividends.The strength in the
UK economy helped some of the
domestically oriented shares, such as
ToppsTiles, NewRiver Retail and
Matchtech, to perform well. Performance
was also enhanced by a bid for AZ
Electronics at a premium of more than
50% above the prevailing price.Victrex
was sold and the holdings of Pendragon and
Centrica were reduced. New purchases
were made in Foresight Solar, In nis, Real
Estate Credit Investments and Safestyle.
All should bolster the income of the
portfolio over the coming year. The
holding of Lloyds Bank was increased in
anticipation of its return to meaningful
dividends.This year should see continued
recovery in economies which would help
pro tability. Monetary conditions are likely
to be less supportive which will produce
some volatility.
D
uring the fourth quarter of 2013,
markets remained focused on
economic data and the potential for
changes in monetary policy by central
banks.Weaker employment data from
the US and disappointing economic
indicators in Europe fuelled expectations
of a continuation of quantitative easing
across developed markets, supporting
broad equity and bond returns. During
November, broad equity returns were
reasonably strong, but regional returns
showed some divergence, and government
bonds underperformed. In the US,
economic data picked up. October Fed
meeting minutes introduced the idea of
maintaining accommodative policy through
a change in tools rather than an outright
removal of stimulus. European equities also
performed well, driven by a surprise ECB
rate cut. UK economic data continued to
show strength, and growth forecasts were
revised upwards. In emerging markets,
economic data stabilised across a number
of regions, with strong activity indicators in
China and Korea. Equity sector exposures
in clean energy and water delivered
impressive returns, and high-yield debt also
bene ted fund performance. Emerging
market infrastructure holdings delivered
positive performance, despite negative
performance from emerging market
debt holdings. Commodities were a key
detractor from returns during the period.
George Luckraft
Zak Summerscale
BlackRock Market Advantage Team
THE INVESTOR CENTRE
T
he portfolio performed well in the
fourth quarter as senior secured
bonds provided healthy returns in the face
of volatility within the broader equity
and xed-income markets. Politics held
much of the headlines in the quarter,
particularly with events surrounding the
US government shutdown and the eventual
extension of its debt ceiling in October.
Central banks also stayed in the spotlight
as the US Federal Reserve maintained its
quantitative easing programme, while
interest rate cuts in Europe caused some
surprise among investors.The US economy
continues to show signs of improvement
and with Europe slowly resurfacing from
recession, global senior secured bonds
have continued to provide attractive
returns in an environment of moderate
growth. High-yield issuance has seen
record volumes this year in both Europe
and the US, with defaults remaining at
benign levels. In Europe alone, we have
seen more than €30bn of senior secured
bond issuance, providing the portfolio
with plentiful opportunities to invest in
attractive new issues bonds.The backdrop
remains attractive for the global senior
secured bond market and the portfolio
remains well positioned to provide
attractive investment returns in the
current environment.
BABSON CAPITAL
International Corporate Bond
Signs of recovery see attractive returns
for global senior secured bonds
BLACKROCK
Alternative Assets
Activity in China and Korea, and ECB
rate cut helps European equities
AXA FRAMLINGTON
Diversified Income
Allshare Income
Strong UK data helps to bolster hopes
of a sustained recovery
Interest rate cuts
inEurope caused
some surprise
Economic data
stabilised across a
number of regions
This year should see
continued recovery
in economies
