Liontrust MA Quarter In Review Q3-2022 15.11.22 (Spreads) - Flipbook - Page 22
MPS Income
Declines across equities, bonds and commodities impacted our
Multi-Asset solutions this quarter. Rising interest rates, ongoing fears
of recession and geopolitical concerns all weighed on financial
markets.
below current inflation, they do offer the prospect of ‘real’ yields
further ahead and we believe the asset class still provides important
long-term diversification benefits that help our products to match risk
suitability requirements.
The benefits of diversification have been noticeably absent. Fixed
income, which we have pointed out previously this year, would
usually be expected to provide defensive ballast during equity selloffs, but it failed to provide any defensive support yet again as yields
continued to rise in Q3. We are in a rare period of extreme stress
in which normal asset class diversification has temporarily broken
down.
Our exposure to equities has been trimmed, given the uncertainty that
the asset class faces. This reflects the greater uncertainties that exist
currently with respect to interest rate policies and economic growth.
It makes sense for us to tighten up on risk budgets, at least for the
short term.
As part of our asset allocation rebalancing, our target exposure to
fixed income has increased slightly, particularly in favour of credit.
We have been under-weight fixed income for some time but we are
taking the opportunities to reduce this as yields, which are inversely
related to price, increase.
All major global sovereign bond yields have risen this year and some
bond markets, notably the UK, have even performed substantially
worse than equities. While global government bonds still offer yields
22 - Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q3 2022
The relatively strongest asset class contributors to performance were
North American Smaller Companies and North American Equities
with some support from Emerging Market Bonds. Leading contributors
to performance included Artemis US Smaller Companies and JPM
US Equity Income.
Exposure to UK equities, real estate, inflation-linked bonds and
emerging market equities detracted from performance, with L&G
Global Inflation Linked Bond Index, Royal London Global Index
Linked, Janus Henderson UK Smaller Companies and Fidelity Index
Emerging Markets among our weaker performers.
