Wise Multi-Asset Income

Despite initial concerns over the inflationary impact of US tariffs, the year has seen interest rates fall faster than expected both in the UK and more importantly in the US, which has been a key support for the performance of investment markets over the course of the year. Even though the Federal Open Market Committee (FOMC), the group responsible for setting US interest rates, was more divided than expected, interest rates were cut for the third time as any concerns over lingering inflation and stronger than expected economic performance were trumped by fears that the labour market might be weakening. In fact, November inflation data announced during the month was much softer than expected, strengthening the case for looser monetary policy although concerns persist that inflation continues to run higher than the target 2% and that the weakness of the data might be explained by the recent government shutdown. Longer term, investor attention turned to who might replace Jerome Powell as Chair of the Federal Reserve, the US central bank, with indications from President Trump that his successor might be Kevin Hassett. This caused some consternation in bond markets as it is widely believed he would like to aggressively cut interest rates and in so doing increases the risk of restoking inflation.   In the UK, the Bank of England was faced with signs of a weakening economy, with GDP falling 0.1% in October. Consumer credit card spending saw the largest drop since 2021 and weak construction spending reflected uncertainty as well as low consumer confidence in the run-up to the budget. Weak demand has limited the extent to which companies have been able to pass on higher labour costs with retailers forced to offer more aggressive discounts. This led to lower inflation in the UK and suggests that the Bank of England target of 2% could be reached this summer. Interest rates were also cut by 0.25% to 3.75% and indicates the scope for further interest rate cuts in 2026 remains. The global outlier remains Japan where the Bank of Japan raised its policy rate to 0.75% (a three-decade high) and signalled it was ready to tighten interest rates further.

Elsewhere, China’s leadership explicitly committed to stabilisation and recovery of investment, including more central government infrastructure spending and support to the property market. This potential stimulus to demand coupled with supply disruptions saw copper prices surge above $12,000 per tonne, a record high. At the same time gold and silver reached record highs, driven by geopolitical risk and as a hedge against potential future US interest rate cuts. This pattern reflects broader trends seen all year as did the weakness in the oil price, which fell to its lowest level since 2021, as markets priced in the possibility of a Russia-Ukraine peace deal which would potentially release large volumes of Russian crude oil onto the market.

In December, the IFSL Wise Multi-Asset Income Fund rose 2.3%, ahead of the IA Mixed Investment 40–85% sector, which rose 0.4%. This concluded a strong year for the fund which rose 21.7%, ahead of the comparator peer group which rose 11.6%. Given the backdrop of buoyant commodity markets, our strongest contributors to performance came from our specialist commodity funds, Blackrock World Mining and Blackrock Energy and Resources. Relief that the UK budget was no worse than expected helped support funds with UK equity exposure, such as Man GLG Income and Fidelity Special Values. More broadly our regional and specialist equity funds performed well, notably Polar Capital Global Financials and International Biotechnology Trust. Within Private Equity, Infrastructure and Property we saw divergence in performance. CT Private Equity responded well to its latest results with the underlying portfolio holdings enjoying very strong revenue and profit growth over the period and the prospect of Net Asset Value growth to be reported in coming months. Our core infrastructure holdings performed well in contrast to the renewables holdings, which suffered a hangover from the abandoned merger between HICL Infrastructure and the Renewables Infrastructure Group following HICL shareholder opposition. Within our property holdings, Workspace announced encouraging lettings, a disposal of non-core properties at a significant premium to the level implied by the current share price and the appointment of a new Finance Director, which completes the new management team to drive the company turnaround. Helical announced encouraging results although this failed to be reflected in the performance of the shares.

Over the month, we took profits in Blackrock World Mining, CT Private Equity and International Biotechnology Trust, where recent underlying performance has been very strong and discounts to Net Asset Value no longer look as compellingly attractive. We recycled into holdings where relative performance in recent months has been weaker and that we believe still offer attractive value. Within the property sector we added to Helical, LondonMetric, Picton Property Income and Workspace. Within Fixed Income we added to CVC Income and Growth and the Premier Miton Strategic Monthly Bond Income fund. Finally, we added to our International equity exposure via Pacific North of South Emerging Market Equity Income Opportunities and Brickwood Global Value.