Cornelian Risk Managed Funds - Monthly update

In summary

Global equity markets regained momentum in August as robust corporate earnings and resilient economic data supported risk appetite. Fixed income markets were also generally positive despite ongoing uncertainty about the trajectory of inflation and interest rates, somewhat amplified by conflicting messages from US policymakers. Trading highlights for August:

UK Equities: Two new holdings, IMI and Hill & Smith, were added during the month. Both companies are high quality industrial engineering businesses with market leading positions in attractive end markets, including infrastructure, power, AI/data centres, industrial automation and healthcare

UK Equities: Trainline, Sunbelt Rentals and Future were sold to recycle capital into higher conviction ideas

International Equities

There was a broad based recovery across both developed and emerging market equities as sentiment was buoyed by strong earnings reports and upbeat forward-looking guidance. Allocations to global healthcare (L&G Global Heath & Pharma Index Trust +4.1%) and technology (L&G Global Technology Index Trust +5.0%) equity funds made the strongest gains while European equities lagged somewhat (Vanguard FTSE Developed Europe Ex-UK ETF +0.8%).

UK Equities

UK equities also made positive returns in July but did give back some of the prior month’s relative outperformance. Tech hardware distributor Computacenter (+23.3%) rallied over 20% after upgrading earnings forecasts on strong US data centre demand, while Rio Tinto (+9.2%), Experian (+9.1%), Weir (+8.0%), London Stock Exchange (+7.8%), Cairn Homes (+6.2%) and Hilton Food Group (+6.2%) also performed well. Trainline (-16.1%), Prudential (-8.8%), Tesco (-6.6%) and AstraZeneca (-4.6%) were the main detractors.

Fixed Interest

Robust income generation underpinned a solid month for fixed interest with positive contributions across credit, conventional and inflation-linked government bonds and low volatility and dispersion of returns. The Funds’ fixed income allocation remains focused on generating attractive levels of recurring income with relatively low credit and interest rate sensitivity though shorter tenor lending, predominantly to investment grade corporate borrowers.

Alternative Assets

Alternative assets generated positive returns overall as gains from listed infrastructure and absolute return strategies offset a weaker month for the funds’ real estate holdings. The best performers were listed infrastructure companies Foresight Environmental Markets (+3.8%) and HICL Infrastructure (+2.6%), while shares in Tritax Big Box (-6.3%) declined after announcing a £350m equity raise to accelerate investment in its’ data centre development pipeline.