Wise Multi-Asset Income

Equity markets responded strongly, led by technology and AI-related sectors, reflecting a growing belief that both sides were beginning to feel the economic and political costs of the conflict and were, albeit slowly, moving towards a negotiated outcome. While early rounds of diplomatic talks failed to deliver a breakthrough and subsequent negotiations were delayed, the absence of renewed military escalation was sufficient to sustain the improvement in market sentiment. Nevertheless, the underlying situation remains unresolved. The Strait of Hormuz effectively remains closed, meaning that disruption to global supply chains persists. As a result, the economic consequences of the conflict continue to build beneath the surface despite the positive recovery in investment markets. Inflation has been the most immediate channel through which the conflict impacted economies. Headline inflation moved higher across major regions, reflecting the pass-through from higher energy and transportation costs. While core inflation (which strips out these more volatile components) remained more stable, the persistence of elevated input costs increased the risk that broader price pressures could become more entrenched over time. At the same time, growth data during April largely reflected pre-conflict momentum. Economic activity in both the UK and US remained relatively resilient in the near term, supported by ongoing investment, particularly in AI-related infrastructure. However, forward-looking indicators pointed to a more challenging outlook. Consumer confidence weakened, businesses reported a more cautious operating environment, and global growth forecasts were revised lower. The UK appeared particularly exposed given its reliance on imported energy, while the risk of a slowdown—and potentially recession in some regions—has increased should supply disruptions persist.

Against this backdrop, central banks adopted a cautious stance. The Bank of England, Federal Reserve and European Central Bank all left policy rates unchanged over the month, emphasising the uncertainty surrounding the inflation outlook and the need to balance this against emerging risks to growth. Market expectations for future interest rates were relatively volatile over the period. In the UK, expectations moved from two rate rises by the year-end at the start of month, to just one mid-month as inflation concerns subsided, before returning to two by month-end as concerns grew that a negotiated peace settlement might take time and success was uncertain. Similar volatility was also seen in the US and Eurozone. Weaker labour markets and more subdued underlying economic demand mean this energy shock is different to the one seen post Ukraine which came at a time the global economy was recovering from Covid yet supply chains were disrupted. It is more likely that central bankers are prepared to look through short term inflationary pressures and keep an eye on the impending slowdown to economic growth when making decisions around interest rates.

In the UK, renewed uncertainty surrounding Keir Starmer, particularly ahead of the May local elections, added to concerns around fiscal policy and contributed to upward pressure on gilt yields. More broadly, governments across developed markets face the challenge of managing higher inflation alongside slowing growth, at a time when fiscal flexibility is already constrained.

In April, the IFSL Wise Multi-Asset Income Fund rose 4.4%, slightly behind the IA Mixed Investment 40–85% sector, which returned 5%. Performance was driven by a broad-based rebound in risk assets as the geopolitical backdrop shifted from active conflict towards ceasefire and negotiation. This improvement in sentiment particularly benefited those areas that had been weakest in the prior month, with equities, property and infrastructure leading the gains. Equity markets were a key contributor, with strength particularly evident across our UK holdings. Odyssean Investment Trust performed strongly, supported by a takeover bid for Blackline Safety and a robust trading update from XP Power, its largest holding. More broadly, value-oriented UK strategies benefited from improving sentiment towards domestically exposed businesses. International Biotechnology Trust was again notably strong, benefiting from two more bids for holdings within its portfolio. Elsewhere, holdings that were sold off last month, such as BlackRock World Mining Trust and Pacific North of South EM Equity Income Opportunities, rebounded strongly. Property also recovered meaningfully. This was helped by a series of reassuring company updates highlighting that demand for high-quality assets remains resilient. British Land reported strong leasing activity and rental growth, particularly in prime London campuses benefiting from demand linked to technology and AI-related occupiers. Helical continued to make progress in leasing and development, reducing risk across its pipeline and improving visibility on future income. Meanwhile, LondonMetric delivered stable income growth supported by high occupancy and long lease structures. These updates reinforced confidence that well-located, high-quality real estate continues to perform even in a more uncertain macro environment.

Infrastructure and renewables also contributed positively. Holdings such as The Renewables Infrastructure Group and Foresight Environmental Infrastructure performed well as concerns around government intervention to counter higher power prices proved less severe than initially feared. Policy changes introduced during the month were aimed at lowering electricity prices, reducing volatility, and weakening the link between power prices and gas prices. In simple terms, the government is seeking to move towards a system where renewable generators receive more stable, fixed pricing for their output. While this may limit upside in extreme pricing environments, it improves the predictability of cashflows, with only limited impact on net asset values and potential longer-term benefits through lower discount rates.

Over the month, we recycled capital by trimming positions that had performed strongly since the start of the Iran conflict and year to date, including Pantheon Infrastructure, Middlefield Canadian Enhanced Income, Odyssean Investment Trust and Ecofin Global Utilities and Infrastructure. We selectively added to equity positions such as Fidelity Special Values, Finsbury Growth & Income and Brickwood Global Value, where performance had lagged. We also maintained portfolio balance by adding to fixed income and property exposures, while rebalancing renewables. Finally, we initiated a position in the Neuberger Berman Emerging Markets Equity fund, a differentiated value strategy managed by the former Schroders Emerging Markets team, which we believe is well positioned given the current valuation dispersion across emerging markets.