Ongoing tensions between the U.S. and Iran dominated headlines, with the Strait of Hormuz remaining severely disrupted. Oil prices exhibited significant volatility throughout the month, retreating sharply in early April amid optimism for a Middle East ceasefire before rebounding as negotiations stalled.
Despite these headwinds, equity markets staged a notable recovery in April; global equities delivered one of their strongest monthly returns since 2020. This rally was led by technology companies as AI leadership reasserted itself following the sector’s weakest period of relative performance in fifty years.
As investors rotated back into hyperscalers and AI infrastructure, our position in the iShares Edge USA Value ETF rose by 15.9% driven by its exposure to undervalued technology stocks such as Micron and Intel. Similarly, our holding in the iShares Edge MSCI EM Value Factor ETF benefited from exposure to TSMC and SK Hynix. These companies serve as the ‘picks and shovels’ of the AI movement, capitalising on surging semiconductor demand and rising capital expenditure from hyperscalers, which is projected to surpass $700 billion this year.
In Fixed Income, government bonds continued to reflect concerns over higher energy prices and the prospect of tighter monetary policy as central banks raise rates to tackle persistent inflation. Consequently, UK government bonds notably underperformed, with the 10-year Gilt yield rising to close the month above 5.0% for the first time since 2008.
Within corporate bonds, short-dated Investment Grade bonds continue to provide a haven against inflationary concerns, rising interest rates, and the fiscal profligacy of governments. This was reflected in our allocation to the L&G Short Dated Corporate Bond Fund, which returned 0.3% over the month.
In Alternatives, our allocation to gold posted a modest decline in April. However, structural tailwinds – including ongoing geopolitical uncertainty, robust central bank buying, and concerns over government spending and debt capacity – remain firmly in play.
Our Diversifying Assets allocation once again delivered returns uncorrelated to equities and bonds. Both the AQR Style Premia and Managed Futures funds, which invest across equities, fixed income, commodities, and FX, were up 1.7% and 1.3% respectively.
