May proved a strong month for global equities, with markets buoyed by an exceptional first-quarter earnings season and continued enthusiasm surrounding artificial intelligence. In the US, earnings grew by approximately 12% year-on-year, and the S&P 500 rose 6.1% in sterling terms. Emerging markets were the standout performers globally, with Korea and Taiwan delivering extraordinary gains as investors sought exposure to the AI supply chain through semiconductor companies at more attractive valuations than their US counterparts.
Against this backdrop, our equity holdings performed well. The iShares Global Clean Energy ETF rose 15% over the month, as investors continued to focus on the significant energy infrastructure required to power the expansion of data centres. Our value-oriented equity positions also contributed meaningfully, with the iShares US Value ETF up 21% and the iShares MSCI World Value ETF and iShares MSCI Emerging Markets Value ETF both gaining 16%, as these strategies had exposure to semiconductor stocks seeing earnings upgrades at lower valuations than the market.
The Middle East conflict and associated disruption to the Strait of Hormuz remained a source of volatility throughout the month, though ceasefire negotiations progressed and oil prices fell sharply from their 2026 highs. This fall in oil prices led to a drop in UK yields, creating a positive environment for fixed income. Our sterling corporate bond allocation delivered a modest positive return of around 1.7%.
Within our alternatives and diversifying assets returns were mixed, the AQR Style Premia fund contributed positively, whilst the AQR Managed Futures fund was marginally negative as trend-following strategies faced headwinds from the sharp reversal in commodity prices. Our position in Gold was broadly flat over the month.
