The Investor 90

THE INVESTOR CENTRE

All information correct as at 30 June 2016

2 was dominated by the Brexit

vote,with sentiment driven by

opinion polls. Investors dislike

uncertainty and this caused many to

adopt a low-risk strategy.The risk-o

approach was shownwith 10-year

Germanbunds brie y giving negative

interest rates.There are indicators that

investment decisions were delayed

pending the vote,with some impact

on economic growth.

The oil price continued to recover

and this was re ected in strength in

the shares of BP and Royal Dutch Shell

as investors became more comfortable

that they could maintain their dividend

payment levels.

During the period new holdings

were purchased inAccrol andMidwich

in their otations,with both opening

at good premiums.Microfocus was

repurchased and the holding of Lloyds

Banking Group signi cantly increased.

The holdings ofAshtead,Centrica and

Direct Line Group were sold.

While the vote has given some clarity,

there is likely to be further uncertainty

as the fall-out in the Conservative

Party continues. In the longer term,

quality companies should continue to

bolster their position.

he UK referendumwas a roller-

coaster ride for risk assets, having

started Q2 on a positive footing,with

equity markets moving higher inApril,

May and early June.

The prospects of a second US rate

rise ebbed and owed,with US data

and global events in uencing

policymakers.During May, the chances

increased, before disappointing payroll

numbers cut the odds.

The market outlook on US rates and

the risk aversion driven by concerns

over the UK’s referendum has been

positive for global bonds. In commodity

markets, oil prices breached the $50

barrier.The initial catalyst had been

OPEC’s possible agreement to a

production freeze, before talks

collapsed.However,with production

cuts in the US, supply curtailed due to

res in Canada and attacks on

production in Nigeria, the price has

remained elevated compared to lows

seen earlier in the year.

Against this backdrop, clean energy

and emerging market infrastructure

detracted from performance.

However, commodities and water

were the largest positive contributors

towards the strong performance

delivered by the overall portfolio.

George Luckraft

Martin Horne

BlackRock Market Advantage Team

t the time of writing, the markets

were digesting the impact of the

UK’s vote to leave the EU.Throughout

Q1 and Q2, global markets have been

subject to volatility.Global senior

secured bonds have, throughout other

past volatile periods, showed robust

and defensive characteristics, given the

senior secured nature of these assets.

During Q2, the International

Corporate Bond fund has generated

positive returns.Q2 has seen upward

trends in commodity sentiment,

broadly improving economic indicators,

and accommodative central bank

action, aiding all risk assets.New

issuance has gained momentum and

corporate fundamentals still remain

robust.Within the US, European and

UK asset mix,the fund continues tobe

diversi ed, taking advantage by

deploying capital in new issuance with

attractive secondary market

opportunities.Given the run-up to

the June referendum, the volatility in

sterling-denominated credits has seen

a marginal impact on the fund’s

performance.We

expect near-term

market volatility to be drivenmore by

sentiment than underlying corporate

fundamentals,which should create

attractive entry opportunities.

BABSON CAPITAL

International Corporate Bond

Defensive characteristics of global

senior secured bonds suited to volatility

BLACKROCK

Alternative Assets

Strong overall portfolio performance

thanks to commodities and water

AXA INVESTMENT

MANAGERS

Diversified Income

Allshare Income

Accrol and Midwich added, along with

an increase in Lloyds Banking Group

Energyprices, global

growth andBrexit

all create volatility

UK referendum

caused roller-coaster

ride for risk assets

Investors adopt low-

risk strategydue to

Brexit uncertainty

THE INVESTOR