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THE INVESTOR
E
quity markets were volatile during the
quarter. The onset of tapering led to
sharp falls in some emerging market
currencies as the reversal in investment
ows exposed the weakness in trade
de cits. In addition, events in Crimea
raised fears that a new era of Cold War was
starting. Economic activity in the US was
a ected by a very harsh winter. European
data pointed to some stabilisation; with
encouraging signs in the periphery, where
harsh measures appear to be working.
China embarked on a move to rein in the
shadow banking sector.The recovery in the
UK economy continues with some signs
that this is beginning to bolster investment
spending. Recent strength in sterling is
causing earnings forecasts to be under
pressure from the translation of overseas
earnings.The new issue market was
active and we participated in the placing
of ManxTelecom, DX Group and
Boohoo.com, which all went to useful
premiums.The weighting in the mining
sector was increased by a purchase of BHP
Billiton.The holdings of MedicX Fund and
SevernTrent were sold and part of the
Greencore holding was sold after a rapid
rise.The May elections will begin to bring
politics to investors’ attention and with the
general election then a year away, this could
cause sterling to lose some of its gains.
T
he rst quarter of 2014 began with
a marked‘risk-o ’ tone, as weaker-
than-expected US labour market data and
concerns about the US debt ceiling became
a focus once more. Despite this, the US
Fed voted to reduce asset purchases by a
further $10 billion. In Europe, economic
data showed some signs of improvement,
although unemployment remains elevated.
Nearly all developed equity markets fell
during January, while government bonds
performed well as emerging market
turmoil contributed to risk-aversion.
Several emerging market countries raised
their benchmark interest rates in an
e ort to stabilise currencies; theTurkish
central bank aggressively so, from 7.75%
to 12%. Concerns around emerging
markets continued through February and
early March, with weaker economic data
from China and LatinAmerica weighing
on emerging equity and debt markets.
Although developed equity markets were
supported somewhat by improved company
earnings, M&A activity and the extension
of the US debt ceiling, risk-aversion
meant most regions delivered lacklustre
performance through Q1.Agricultural and
energy commodities, and precious metals,
performed well due to the potential impact
of extreme weather conditions and rising
tensions between Ukraine and Russia.
Commodities and high-yield debt delivered
positive returns to fund performance.
Equity sector exposures in clean energy
and water were also additive to returns.
Emerging market infrastructure exposure
detracted from returns during the quarter.
George Luckraft
Zak Summerscale
BlackRock Market Advantage Team
THE INVESTOR CENTRE
T
he International Corporate Bond fund
continued to perform well in the rst
quarter of 2014, with some geopolitical
volatility being balanced out by strong
underlying corporate fundamentals and
improving investor sentiment, combined
with decent in ows into the asset class.
Default rates in both Europe and the
US remained low, and we still see the
market o ering attractive investment
opportunities.We continue to be able to
invest in our favoured pro le of robust
companies that generate free cash ow
and maintain a well-diversi ed portfolio,
while holding more concentrated positions
in our highest conviction names. Both
the US and European markets performed
well in the rst quarter. New issuance has
been relatively light compared to the same
period in 2013, and as a result we have
seen increased activity in the secondary
market, further supporting senior-secured
bond pricing.We believe the diversi cation
within the fund, combined with our strong
credit discipline and the attractive yields on
o er, will continue to deliver healthy risk-
adjusted returns to investors.
BABSON CAPITAL
International Corporate Bond
Market offers attractive investment
opportunities despite volatility
BLACKROCK
Alternative Assets
Concerns over US debt ceiling as
Europe shows signs of improvement
AXA FRAMLINGTON
Diversified Income
Allshare Income
A rocky ride for equity markets but
UK and Europe recovery stabilising
Both theUS and
Europeanmarkets
performedwell
Nearly all developed
equitymarkets fell
during January
Events inCrimea
raised fears of a new
era of ColdWar
All information correct as at 31 March 2014
