Market and Fund Performance Commentary.
June 2021.
This site is for UK investment professionals only. If you're not an investment professional, please find out more about us at vitality.co.uk.
This site is for UK investment professionals only. If you're not an investment professional, please find out more about us at vitality.co.uk.
Market Commentary.
Market Overview, June 2021.
From SEI’s investment management team.
The broad-based advance in equities, commodities, and riskier fixed-interest asset classes accelerated during the second quarter, and most notably in June, fuelled by the reopening of the global economy.
Developed-market equities outpaced emerging markets for the full quarter. US equity markets had the greatest gain among major countries, followed by Europe, the UK, then Hong Kong and mainland China. Japanese equities were modestly negative.
Uncertainty around the duration of the current inflationary pressure has caused an increased volatility in rates. UK Gilt and US Treasury rates declined across most maturities through April and May; then short-term rates bounced in June, finishing the quarter higher than where they began, while intermediate-to-long-term rates continued to decline, resulting in flatter yield curves.
Emerging-market debt was the best-performing fixed-interest asset class during the second quarter, followed by US corporate bonds—with investment-grade leading high yield—and inflation-protected securities also performed notably well.
Commodity prices also increased sharply during the second quarter, but most of the advances came in April and May. A strengthening US Dollar limited the commodities rally in June.
Source: Vitality and SEI, June 2021
The broad-based advance in equities, commodities, and riskier fixed-interest asset classes accelerated during the second quarter, and most notably in June, fuelled by the reopening of the global economy.
Developed-market equities outpaced emerging markets for the full quarter. US equity markets had the greatest gain among major countries, followed by Europe, the UK, then Hong Kong and mainland China. Japanese equities were modestly negative.
Uncertainty around the duration of the current inflationary pressure has caused an increased volatility in rates. UK Gilt and US Treasury rates declined across most maturities through April and May; then short-term rates bounced in June, finishing the quarter higher than where they began, while intermediate-to-long-term rates continued to decline, resulting in flatter yield curves.
Emerging-market debt was the best-performing fixed-interest asset class during the second quarter, followed by US corporate bonds—with investment-grade leading high yield—and inflation-protected securities also performed notably well.
Commodity prices also increased sharply during the second quarter, but most of the advances came in April and May. A strengthening US Dollar limited the commodities rally in June.
Source: Vitality and SEI, June 2021
Fund Performance Commentary.
VitalityInvest risk-profiled solutions.
VitalityInvest Risk Optimiser (VIRO) and EnVIRO funds.
From VitalityInvest’s investment team. The VIRO and EnVIRO range adopt a similar asset allocation.The VIRO funds returned between 1.0% (VIRO 3) and 2.2% (VIRO 7) whilst the EnVIRO funds returned between 1.2% (ESG Risk Optimiser 3) and 2.8% (ESG Risk Optimiser 7) in June. The growth in global equity markets and the decrease in long term bond yields contributed to positive performance.
The continued advance of global equity markets in June, supported by the momentum which started earlier in the year, was the key driver to the returns of the two ranges. In developed markets, US and European equity were the strongest contributing factors for the month. Emerging market and Asia Pacific equities, despite underperforming global developed markets, were also contributors to the higher risk profiled funds (risk profiles 5 to 7), which were also supported by the higher allocation to equity.
From a fixed income allocation perspective, long term yields contracted and investment-grade credit spreads decreased. Overall, the fixed income allocation of the funds was accretive in June, especially within the lower risk profiled funds (risk profiles 3 to 5), led by UK gilts and corporate bonds.
ESG considerations for the EnVIRO range
From an ESG perspective, the EnVIRO range benefitted from the outperformance of some of the underling ESG optimised exposure against traditional indices, such as corporate bonds (ESG Risk Optimiser 3 and 4) and emerging markets, Asia Pacific and European equity (ESG Risk Optimiser 5 to 7). As a result of the Fed (US Federal Reserve) signals of a more hawkish rate outlook than previously anticipated, long-term bond yields decreased, and paused the reflation trade that took place earlier in the year. As a result, technology stocks and other growth sectors, which tend to have a larger exposure in ESG-focused strategies, were favoured over more cyclical and value sectors over the month.Source: Vitality, June 2021
VitalityInvest risk-profiled solutions.
VitalityInvest Global Multi-Manager funds.
From SEI's investment management team.The VitalityInvest Global Multi-Manager funds returned between 0.7% (Global Multi-Manager 3) and 2.0% (Global Multi-Manager 7) in June. The reflation theme that had characterised the start of 2021 paused in June as investors digested recent gains and took on board falling inflation expectations and bond yields.
The funds’ fixed income allocations performed in line with, or slightly ahead of, their respective benchmarks in a month that saw credit spreads continue to grind lower. Cyclical stocks, financials and, commodity prices, in particular, pulled back sharply in the days following the mid-June US Federal Reserve policy meeting.
Value stocks, naturally positioned for faster economic growth, rising yields, and price increase, sold off sharply in June giving up the gains that had been made over the quarter. Defensive segments of the equity market, such as utilities and consumer staples, also lagged. By contrast, growth names and big tech stocks rebounded strongly as future inflation expectations receded.
The Global Multi-Manager funds, with a value tilt within equities and higher diversity, did not perform as strongly as the broad market. The funds’ position remains broadly unchanged as SEI believe the drivers for a multi-year value rally remain in place, namely higher inflation, accelerating real economic growth, and challenging valuation multiples for many fashionable growth stocks.
Source: SEI and Vitality, June 2021
Performer Funds.
Outcome-based multi-asset funds.
From Ninety One’s Multi-Asset and Quality teams.The VitalityInvest Ninety One Multi-Asset Income fund detracted 0.2% in June. The fund’s focus on more resilient assets meant that the fund was defensively positioned and it didn’t capture the positive trend in global assets.
The VitalityInvest Ninety One Dynamic Multi-Asset fund returned 1.0% in June. The fund benefitted from its flexible investment philosophy and diversification and managed to capture the momentum of global assets in June.
Source: Ninety One and Vitality, June 2021
Performer Funds.
Single-asset class: Global and UK Listed Equity funds.
From Ninety One’s Multi-Asset and Quality teams.The VitalityInvest Ninety One Global Equity Growth and Income funds returned 5.2% and 4.8% respectively in June. The VitalityInvest Ninety One UK Listed Equity Growth and Income funds returned 0.1% and 0.9% respectively.
The momentum of global equity pushed quality stocks higher globally in June. Higher dividend yielding stocks also continued their momentum in June. These were both positive factors which supported the positive performance of the equity funds over their sectors and benchmarks. UK equity underperformed global developed equity markets on the back of the pause of the reflation trade seen earlier in the year, and the renewed interest in growth sectors over value.
Source: Ninety One and Vitality, June 2021
Important information.
VitalityInvest is a trading name of Vitality Corporate Services Limited. Vitality Corporate Services Limited is authorised and regulated by the Financial Conduct Authority.Past performance should not be taken as a guide to the future performance and there is no guarantee that an investment will make profits: losses may be made.
VitalityInvest makes every effort to ensure that the information provided in this commentary is accurate and complete but no guarantee or warranty is given. This commentary is for general information purposes only and is not to be relied upon in making an investment or any other decision. Nothing in this commentary constitutes investment, legal or any other advice. This commentary is for investment professionals only and any retail customers should speak to an authorised financial adviser before making any investment decision.