Included in the latest headline performance numbers is the best quarterly performance for the Nasdaq since 2020, which was up 17% despite some of the worst banking fears since the Global Financial Crisis. It is the latter that mostly led to the former, as markets began to price in an increased likelihood that Central Bankers around the world would be cutting interest rates sooner rather than later in response to falling inflation and cracks in the system.

Against that backdrop, equities whose cashflows are expected to occur long into the future (long duration assets) have performed particularly well. But we have also been pleased to see a continued strong year-to-date performance from more attractively priced retail companies held within the portfolio such as Kering (+26%), Auto Trader (+20%) and Next (+13%).

Looking beyond the next six to nine months, we remain concerned about the consensus sanguine view on a return to permanently lower inflation and its corresponding hopeful view on a meaningful decline in interest rates. And to that extent we see current volatility as our friend in offering opportunities to increase our exposure to high quality financials whose share prices have been weak year-to-date, such as JP Morgan (-3%), Hargreaves Lansdown (-7%) and Close Brothers (-14%).

We have also been pleased to see that several companies held within the portfolio have taken the opportunity to complete acquisitions in the current environment. On the 28th March, Halma acquired FirePro, a fire safety technology company headquartered in Cyprus. On the 29th March, Next bought floral lifestyle brand, Cath Kidston. And on the 19th March, UBS acquired long-term rival Credit Suisse. We hope that all of these acquisitions will come to represent attractively priced assets and ultimately create long-term value for us as investors in the parent companies.

In the same way that wind can spread a fire and extinguish a candle, volatility can help the long-term investor and hinder the short-term one. We believe that current market volatility, whilst challenging, offers an opportunity to long-term investors to protect their portfolio from certain challenges in an uncertain world.

James Godrich, Fund Manager

The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities. At times, the firm or employees of the firm may have positions in securities discussed.  Should any conflict of interest arise, these are managed under conflicts of interest policy, a copy of which is available on request.

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