March 2016

Manager Commentary

Risk assets performed extremely well during the month of March and the MSCI World rallied 6.52%. The change in investor sentiment since the middle of February has been extraordinary and largely driven by shifts in Central Bank policies. European equity markets were supported by the ECB’s announcement of additional stimulus measures. The Governing Council reduced three key benchmark interest rates, expanded the asset purchase programme to include non-financial investment grade corporate bonds and launched a series of targeted longer term refinancing operations aimed at boosting liquidity in the banking system. The EURO STOXX 50 climbed 2.01% and the German DAX rose 4.95%. As expected the US Federal Reserve left interest rates unchanged, but surprisingly appears to have adopted a more dovish stance on the timing of future movements. Fed Chair Janet Yellen cited an uncertain global environment and weak inflation, whilst indicating that the Board was still on course for another two rate hikes by the end of the year. The S&P 500 increased 6.60%, but gains in the FTSE 100 were limited to 1.28% following the publication of further polls indicating no clear winner in the EU Referendum. The US dollar weakened across the board and fell -3.18% against sterling and -4.66% versus the euro. The majority of commodity markets rallied along with the uptick in investor risk appetite and the GSCI rose 4.87%. The energy spectrum continues to recover and the prices of oil and natural gas increased 13.60% and 14.49% respectively. Government bond prices in the US and UK closed marginally lower, but corporate bond spreads tightened significantly on the back of investor flows seeking positive yielding investments.