Wise Multi-Asset Income

This prompted a reassessment of valuations across technology companies and semiconductor manufacturers, one of the market’s most crowded investment themes. Following exceptional gains, even modest earnings disappointments resulted in sharp share price corrections as elevated expectations were reset. Importantly, this reflected positioning and valuation rather than any meaningful deterioration in AI’s long-term investment case, with spending on AI infrastructure continuing to expand. Encouragingly, weakness in technology shares did not develop into a broader market sell-off. Instead, investors rotated towards more attractively valued sectors and regions, resulting in a welcome broadening of market leadership. Value stocks outperformed growth, while UK equities emerged as one of the strongest performing major markets, supported by attractive valuations, continued merger and acquisition activity and improving confidence in the UK’s political and fiscal outlook. Andy Burnham’s commitment to maintaining the fiscal rules, together with the appointment of a Chancellor viewed by markets as fiscally credible, helped reduce political uncertainty. Continued takeover activity further reinforced the view that UK companies remain attractively valued relative to international peers.

Economic data generally surprised positively. The UK economy remains resilient, supported by stronger retail sales, improving consumer confidence and a rebound in business activity, while inflation fell to 2.6%, below the Bank of England’s earlier projections. The US presented a more mixed picture, with softer labour market data offset by resilient consumer spending and easing inflation. Europe showed tentative signs of recovery, particularly within manufacturing, while China remained the notable exception, with weak domestic demand and continued property market weakness offsetting strong export growth. Geopolitics was the principal source of macroeconomic uncertainty. Following a brief period of relative calm, tensions between the United States and Iran intensified once again, with renewed disruption around the Strait of Hormuz raising concerns over global energy supplies. Brent crude oil rose from around $70 per barrel at the beginning of the month to briefly exceed $100 before easing back below $90 by month end. Although markets stopped short of pricing in a prolonged regional conflict, investors increasingly recognised that higher energy prices were likely to slow the return of inflation towards central bank targets.

Consequently, markets looked beyond the modestly lower-than-expected inflation data released during the month and instead focused on the outlook for inflation over coming quarters. Expectations for interest rates shifted higher across the US, UK and Europe despite no major central bank changing policy. Government bond yields rose across developed markets as investors priced in a greater probability that interest rates would remain higher for longer. Markets also adjusted to a different communication approach from new Federal Reserve Chair Kevin Warsh, whose reduced emphasis on forward guidance contributed to greater uncertainty over the future path of monetary policy and added to bond market volatility.

Against this backdrop, the IFSL Wise Multi-Asset Income Fund rose 3.2% during July, outperforming the IA Mixed Investment 40–85% Shares sector, which fell 0.5%. The broadening of market leadership proved particularly supportive for the portfolio. As investors rotated away from highly valued technology stocks towards more attractively valued areas of the market, the Fund benefited from its exposure to UK equities, value-oriented global managers and real assets, while having relatively limited exposure to many of the weaker performing technology and semiconductor names. UK equities were among the strongest contributors to performance. Holdings including Fidelity Special Values, Odyssean Investment Trust, Finsbury Growth & Income Trust, Paragon Banking Group and Legal & General all delivered strong returns as investors increasingly recognised the attractive valuations available within the UK market. The combination of resilient economic data, improving political stability and continued merger and acquisition activity provided a supportive backdrop. Paragon Banking Group also reported another encouraging trading update, with robust loan growth, improving credit quality and continued capital generation. The portfolio also benefited from its exposure to global and emerging market managers with a strong valuation discipline. These portfolios remain significantly underweight many of the semiconductor companies that now dominate global and Asian equity indices. As enthusiasm surrounding the AI theme moderated, this positioning proved beneficial. Holdings such as Brickwood Global Value, Schroder Global Equity Income, Prusik Asian Income and Neuberger Berman Emerging Markets held up well relative to broader indices. In Asia in particular, index performance has become increasingly concentrated in a small number of semiconductor companies, leaving diversified, valuation-focused managers looking markedly different from their benchmarks. Property and infrastructure holdings also contributed positively. Trading updates from British Land, LondonMetric and Helical continued to demonstrate healthy occupier demand, rental growth and active asset management. Corporate activity across the sector, including the proposed acquisition of SEGRO and the continuing interest in Picton Property Income, reinforce our view that high-quality property assets remain attractively valued. Limited new supply, elevated replacement costs and resilient occupier demand continue to support rental growth, while infrastructure holdings also benefited from positive strategic updates and asset disposals completed at values well above prevailing share price discounts, highlighting the disconnect between public market valuations and underlying asset values.

During the month we exited Pantheon Infrastructure following a strong period of performance and a narrowing of its discount to net asset value, reduced GCP Infrastructure and added to VH Global Energy Infrastructure. Within property, we switched part of our holding in British Land into TR Property and Helical following strong relative performance, while switching LondonMetric into Picton Property Income to benefit from the proposed transaction between the two. Within emerging markets, we reduced Pacific North of South Emerging Market Equity Income and increased our holdings in Neuberger Berman Emerging Markets and Prusik Asian Income. Finally, following a period of exceptionally strong performance, we reduced International Biotechnology Trust and recycled proceeds into Fidelity Special Values and Brickwood Global Value.