Cornelian Risk Managed Funds - Monthly update

In summary

Global equities powered higher during May, pushing major global indices to fresh all-time highs. Robust corporate earnings, excitement around AI-related investment and optimism of a much hoped-for resolution to the Middle East conflict drove a powerful rally in risk assets. Trading highlights for May:

International Equities

Technology continued to be the dominant driver of investor enthusiasm and stock market performance in May, with outsized gains accruing to those regions, sectors and companies exposed to AI-related capital spending. Powerful rallies from AI-heavy Korea and Taiwan drove Asia ex-Japan (L&G Pacific Index Trust +16.8%, Schroder Asian Total Return Fund +16.8%) and Emerging Markets (Vanguard Emerging Markets Stock Index Fund +10.6%, JPM Emerging Markets Income +10.2%) to record a second consecutive month of double-digit gains, while the technology-heavy US benchmark index (SPDR S&P 500 ETF +6.01%) left our active managers struggling to keep up (BNY Mellon US Equity Income +3.9%, Findlay Park American Fund +1.2%). Within thematic equities, global healthcare (L&G Global Health and Pharma Index Trust +3.5%) had a comparatively quiet month while technology delivered exceptionally strong gains (L&G Global Technology Index Trust +16.8%)

UK Equities

UK equities had a comparatively lacklustre month overall, with political concerns and weak economic data holding back sentiment. Double-digit gains from Computacenter (+18.7%), Compass (+14.8%) and Intertek (+14.6%) were offset by underperformance from Tesco (-8.7%), Trainline (-7.0%), National Grid (-6.4%), Weir (-7.8%) and Autotrader (-11.0%).

Fixed Interest

Fixed Interest delivered another month of solid returns driven by income generation, albeit lagging the UK gilt market which rallied as weak economic data pulled down future interest rate expectations (yields move inversely to bond prices). The Funds’ fixed income allocation remains focused on generating attractive levels of income with relatively low credit and interest rate sensitivity though shorter tenor lending, with a bias to high quality investment grade corporate borrowers. The strongest performers were the TwentyFour Income (1.9%) investment trust, the 4.5% UK Treasury Gilt 07/09/2034 (+1.9%) and the Vanguard UK Investment Grade Bond Index Fund (+1.7%)

Alternative Assets

Alternative Assets had another pleasing month with Absolute Return, Infrastructure and Real Estate all generating positive returns. The strongest performers were listed infrastructure companies HICL Infrastructure (+6.5%) and Foresight Environmental Infrastructure (+14.5%), and the specialist UK care home landlord Target Healthcare REIT (+6.1%), all of which provided encouraging updates to the market during the month.