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THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 31 March 2015
T
he quarter saw some very big moves in
currency and commodity prices.The
US dollar was strong and the euro was weak
as the ECB embarked on further QE.
Sterling was weak against the dollar and
strong against the euro.The oil price was
volatile and saw further weakness, with the
fall extending to around 50%. Other
commodities, such as iron ore, fell as
Chinese growth rates slowed.The big
currency moves led to large di erences in
stock market performances, with European
markets outperforming the US by a large
margin.The UK stock market saw pressure
on commodity-related stocks. QE in Europe
helped yields on government bonds to
initially fall, providing support for
income-producing equities. During the
quarter, new acquisitions were made in
Aviva, Direct Line, Eurocell andVPC
Speciality Lending, all of which should
contribute positively to the running yield of
the portfolio.The holdings in Game Digital,
Microfocus andWoleseley were sold.
Q
1 2015 saw a stabilisation of the key
market themes that had emerged
during Q4 2014. Oil prices stabilised
somewhat during February and March,
while US 10-year government bond yields
settled at around 2%. US core in ation data
(excluding food and energy) came in above
expectations during February, while housing
and labour market data were also strong.
In Europe, although growth and in ation
remain weak, economic indicators have
begun to indicate improvement. Fourth-
quarter GDP was above expectations at
0.3%, annual in ation rose to -0.3% (from
-0.6% in January) and unemployment fell to
11.2%. In the UK, overall in ation fell to a
record low in January, at 0.3% annualised,
although stripping out the e ects of food and
energy shows yearly in ation at 1.4%; GDP
remained robust at 2.7% annualised. Japan
emerged from recession during Q4 2014,
while industrial production and exports
were strong in January (although weaker
than expected). In emerging markets, the
stabilisation in oil prices, the cease re in
Ukraine and a second rate cut by the Chinese
central bank removed some uncertainty, but
ongoing growth and geopolitical concerns
continued to weigh on performance. In
terms of positive contributors to fund
performance during the period, equity
sector exposures, notably in clean energy,
were additive to returns. Emerging market
infrastructure and debt delivered positive
performance, while index-linked gilt
holdings and developed infrastructure
assets struggled.
George Luckraft
Zak Summerscale
BlackRock Market Advantage Team
S
enior secured bonds performed well
in the rst quarter of 2015, with
the International Corporate Bond fund
providing attractive yields across a robust,
diversi ed set of senior secured credits.
Favourable market technicals and the
introduction by the ECB of QE contributed
to global high-yield bonds posting positive
returns over the period, with new issues,
particularly in Europe, ful lling strong
demand. US energy names were the
outperformers during February, helped by
easing geopolitical tensions and oil price
stabilisation.We saw some pull-back in the
US high-yield market linked to resurfacing
rate concerns, a weaker stock environment
and US dollar rally.Year-to-date primary
issuance in both the US and Europe is
tracking ahead of the same period last
year. In Europe, we continue to see strong
volumes of senior secured bond issuance,
reinforcing the asset choice available to
the strategy.We anticipate that the global
senior secured bond market will continue to
provide opportunities within robust credits
with attractive overall yields. European
bond markets are becoming progressively
appealing to US issuers in respect of pricing
as monetary policies between Europe and
the US begin to diverge.The fund is well
placed to take advantage of primary market
activity, as well as selective secondary market
opportunities, thus providing investors with
a strong source of risk-adjusted returns
moving forward.
BABSON CAPITAL
International Corporate Bond
Introduction of QE across eurozone
contributes to high-yield bonds
BLACKROCK
Alternative Assets
Uncertainty eases as stability in key
markets helps improvement
AXA FRAMLINGTON
Diversified Income
Allshare Income
Moves in currency prices lead to
varying stock market performances
US energynameswere
the outperformers
during February
In theUK, overall
in ation fell to a
record low in January
The oil pricewas
volatile and saw
furtherweakness
