Update on recent market volatility
Please find below an investment update in the context of heightened levels of market volatility. If you require an update on specific investment strategies or you wish to talk through portfolio positioning in the current environment, please contact your representative at Insight.
As a reminder, our Market Monitor provides a daily update of levels and movements across a range of key market indicators, updated as at the end of the previous day.
You can also access our latest thinking here.
A brief general update on our strategies follows below:
- Equities: In our absolute return equity fund we have been actively managing certain positions, particularly in areas exposed to travel and leisure, exiting some positions entirely and tightening hedges in others to move to a net short position. We have also tactically closed some positions to take profits, with a view of potentially re-entering these trades at better levels in future.
- Multi-asset: We have actively managed our exposures, tactically reducing equities, high-yield credit and emerging market debt. Although returns have been negatively impacted, this follows a very strong performance in 2019 and the drawdown has been moderate relative to the sharp declines seen in equity markets. For regular updates our weekly review can be found here.
- Discretionary liability hedging: We only deviate from the benchmark when we see market inefficiencies that fit stringent criteria and we believe can be exploited to add value. We also manage the size of any deviations according to our confidence that they will reduce the long-term cost of hedging. Our position is currently relatively low (i.e. close to clients’ benchmarks) and we continue to monitor it closely.
- Credit: In credit strategies we maintain highly diversified portfolios and have been focusing on those issuers that have ample liquidity and fundamental strength. In Europe we have reduced exposures to subordinated bank debt, consumer goods and transport which may be more vulnerable to any economic downturn. In short-dated high yield we have raised liquidity levels and limited our exposures to sectors such as retail and autos.
- Secured Finance: We have limited exposure to assets that are directly related to the supply chain, and ultimately the creditworthiness of ABS is largely determined by employment and affordability. We believe it will be some time (if at all) for unemployment to rise materially enough for this to be of concern. We are confident that the structures we own are robust, and for higher-rated (AAA/AA) bonds that are very short duration we do not expect any negative impact.
- Absolute Return Bonds/Bonds Plus: Some recent gains have been given back, but following a strong Q4 and January. The portfolios exposure to long-dated inflation expectations in the US has been a material drag in the short term, as real yields have failed to keep up with the rally in nominal yields. We have maintained this position as we believe that there is limited potential for further downside given that the position is close to multi-year lows.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This document must not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or otherwise not permitted. This document should not be duplicated, amended or forwarded to a third party without consent from Insight Investment.
This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass.
Past performance is not indicative of future results.
References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.
The information and opinions are derived from proprietary and non-proprietary sources deemed by Insight Investment to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Insight Investment, its officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader.