QUARTERLY INVESTMENT COMPANIES ROUNDUP – SECOND QUARTER 2018
Global equities markets rose in the second quarter of 2018, Markets were volatile, as positive economic data and encouraging company performances played off against geopolitical concerns.
Yields from bond markets rose early in the quarter but fell back as investors turned to ‘safer’ investments. The threat of a trade war and the strength of the US dollar contributed to falls in emerging markets, particularly in Asia.
Discounts, which had been drifting out a little in 2018, narrowed again towards the end of the quarter.
Premiums / discounts on the property and infrastructure sectors appear to be responding to changes in UK government bond yields. Both sectors are income providers and investors’ views on the prospects for interest rates appear to be feeding through into sentiment. Over the quarter, the prospect of interest rate rises in the UK seems to have receded, gilt yields have fallen and premiums on property and infrastructure funds have risen.
The majority of investment funds delivered positive returns. Funds investing in the US performed well over the quarter, helped by a stronger US dollar. The same was true for companies with US dollar earnings and/or with exposure to commodities and oil. The technology sector did well for most of the quarter, but we saw a bout of profit taking towards the end of it.
Performance Data – EF Realisation benefited from its holding in US shale oil and gas company Lonestar Resources and the strong oil price. Syncona held Autolus Therapeutics, which IPO’d during the quarter.
Major news stories – There have been a number of fund manager changes and fee reductions, with the managers of Invesco Perpetual Enhanced Income and Vietnam Holding both resigning and then being reappointed. Monks and Securities Trust of Scotland were amongst those funds that reduced their fees during the quarter.
Money in and out – Scottish Mortgage issued shares worth more than £150m during the quarter.
Significant rating changes – Syncona should have received an uplift in value of £152m (equivalent to 14% of its NAV at the current share price) on its holding of Autolus Therapeutics, when that company listed on NASDAQ. Investors in FastForward Innovations are less enthusiastic about the company since it sold its cannabis investment. Its premium to NAV remains high, however.
