Wise Multi-Asset Income

In the case of the two US neighbours, the implementation of the proposed tariffs was delayed after both countries committed to enhancing their border security measures to address US concerns regarding illegal immigration and drug trafficking. However, this has proved to be only a temporary reprieve with the original tariffs being imposed at the start of March. As was the case with China, both countries have promised to respond with tariffs of their own thus threatening an escalation towards a tit-for-tat trade war. Although Europe has so far avoided any tariffs, plans have recently been announced to impose similar 25% tariffs with the indication these would be applied broadly. Whilst specific tariffs on the export of aluminium and steel also imposed in the month affect the UK, thus far the country has managed to avoid anything more draconian and a meeting between Trump and Kier Starmer even threw up the possibility of a trade deal being signed. Such policies are likely to slow global growth and increase inflation and signs emerged in February that these actions could compound existing trends affecting the US economy. Over the month, data pointed to the US economy growing slightly slower than previously expected whilst inflation was higher than forecast. Consumer confidence has slipped and housing sales have fallen, both of which point to a level of caution in the face of political uncertainty. In the UK, interest rates were cut by the Bank of England by 0.25%, as expected, however the accompanying halving of the estimated growth rate for the UK economy for this year and the expectation that inflation would rise to 3.7% in Q3 and only fall back to the 2% target by 2027 highlight the fiscal difficulties facing the Chancellor, particularly as pressure grows to increase defence spending. Attempts by Trump to bring about peace in the Middle East and Ukraine proved equally clumsy, with the vision of a Middle Eastern Riviera and withdrawal of US support for Ukraine leaving investors unsure of which traditional post-War alliances can be relied upon. The clear conclusion drawn, however, is that European defence spending will have to increase.

The shift away from the recent market winners continued over the month with US equities continuing to lag. Initially, investors had been buoyed by the prospect of a Trump second term and the expected boost this might deliver to the US economy, however, it is noticeable that since the end of November the broad index of US smaller companies (those most likely to benefit from a boost to the domestic US economy) has fallen nearly 11% with nearly half of that fall coming in February. Technology shares, which have seen stellar returns recently, also fell as heavyweight stocks in the sector saw slightly slower growth than expected or committed to heavy future capital investment. International equity markets performed better with the UK, Europe and Emerging Market equity indices all posting positive returns in the month. Bond markets delivered positive returns as fears over the persistence of inflation were trumped by concerns over global growth and benefitted from a flight to safety at a time of heightened political uncertainty.

In February, the IFSL Wise Multi-Asset Income Fund fell 0.1%, ahead of its peer group, the IA Mixed Investment 40-85% sector, which fell 1.6%. For our financial year ending in February, our Fund returned 11.5% ahead of its peer group (+9.7%). Our fixed income holdings delivered positive returns led by TwentyFour Income, which continues to deliver consistent growth in net asset value (NAV) and GCP, which announced a stable NAV and some progress in its commitment to realise assets, reduce equity-like exposure and return capital to shareholders. With a supportive backdrop from government bonds it is somewhat surprising not to see stronger performance from our infrastructure holdings. There was a noteworthy bid in the core infrastructure sector for BBGI, a direct competitor to our two holdings (International Public Partnerships and HICL Infrastructure), at a premium to its stated NAV. We believe this underpins the valuation of both our holdings which sit on an average discount of 28% and were surprised not to see the shares re-rate higher in sympathy. Both companies have subsequently announced it is their intention to continue with the strategy of realising assets and increasing their share buybacks given the valuation anomaly that persists. Performance within our property holdings was mixed. Urban Logistics provided a positive lettings update, which saw void properties reduce and rents achieved ahead of valuers forecasts whilst Helical announced it had signed a development financing facility and building contract for its King William Street development. Both saw their shares respond positively whilst Empiric Student Property and Care Reit, where there was no news flow, both drifted lower. Again, it is notable there have been a couple of bids for companies in the property sector as well as the IPO of an activist investment trust targeting the value on offer in the sector, both of which we see as supportive to current valuations. Elsewhere, International Biotechnology Trust and our commodity holdings both detracted to performance over the month as did CT Private Equity, which saw its discount widen back out from tight levels at the start of the month.

Over the month we reduced holdings that have performed strongly, most notably CT Private Equity, abrdn Asian Income, Paragon Banking, Polar Capital Global Financials and TwentyFour Income.