The Investor 89

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30 | THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 31 March 2016
The first quarter began with a
degree of trepidation as the
continued fall in commodity prices
caused stress in parts of the high-yield
debt market.
Commodity price recovery caused
a strong rally in mining shares, helping
the market to rally.Dividends were
affected by the tough trading
conditions,with most of the FTSE-
100 miners reducing or passing their
dividends; as did banks such as Barclays
and Standard Chartered. In contrast,
Lloyds Bank returned to paying
meaningful increased
our holding in Lloyds while selling
BHP Billiton and RioTinto. In other
parts of the market there were special
dividends,with the fund benefiting via
holdings in FDMGroup, ITV, Safestyle
and Shoe Zone.The fund continued to
benefit from takeover activity with
KBCAdvancedTechnologies receiving
competing bids at a good premium.
The increase in QE by the ECB is
likely to increase the appeal of good
income-producing equities.The
forthcoming Brexit vote will cause
uncertainty: uncertainty will produce
volatility,which should present some
good opportunities.
Heightened volatility and a renewed
collapse in oil prices marked the
start of Q1,with risky assets suffering.
On 7 January our downside
risk-management indicators went off.
Investor sentiment,measured by our
RiskTolerance Indicator, fell to
extreme levels and we decided to
reduce risk across the portfolio.Our
other indicators were relatively
normal and valuations appeared
close to their long-term averages,
hence the modest reduction.
Oil,China and the US economy
dominated investor sentiment,
impacting the performance of the
emerging and economic factors.Oil
reached a 12-year low. In China,
speculation around further devaluation
increased, and fears over a more
pronounced slowdown pressured other
Asian markets, as Japanese equities
entered an official bear market.After
a strong upward reversal in markets
mid-February, risky assets stabilised.
Safe-haven assets stayed popular,with
large flows into gold.Exposure to timber
detracted from performance, while
infrastructure and investment grade
debt were the largest contributors.
George Luckraft Martin Horne BlackRock Market Advantage Team
T he global senior secured bond
market has endured a volatile first
quarter of 2016 in line with broader
risk assets, but the performance has
been strong.Over the first half of the
quarter, the sell-off in risk assets
characterised markets; global growth
concerns, new lows in oil prices, and
apprehension over a possible Brexit
drove sentiment. By mid-February,
market conditions began to improve
as oil prices rebounded, encouraging
rhetoric came out of China, and US
economic indicators showed strength.
New issue levels have remained soft,
but we saw a slight pick-up in US
issuance and flows as the economy
strengthened.Despite subdued
issuance levels in Europe, 50% of
year-to-date high-yield bond issuance
has been senior secured.Within the
International Corporate Bond fund we
consolidated the portfolio during the
recent stronger market by selling some
of the smaller positions and increasing
some of the existing names.The ECB
announcement of further easing has
started to filter positively into
European markets.The US Federal
Reserve held interest rates and toned
down rate-rise expectations for 2016.
BABSON CAPITAL
International Corporate Bond
Portfolio consolidated by selling
positions during stronger market
BLACKROCK
Alternative Assets
Risk reduced across portfolio as
Risk Tolerance Indicator fell
AXA INVESTMENT
MANAGERS
Diversified Income
Allshare Income
Holding in Lloyds Bank increased on
news of special dividend
Market Brexit jitters
smoothedby
improving oil prices
Oil, China and theUS
economydominated
investor sentiment
Commodityprice
recoveryhelped the
miningmarket rally