Wise Multi-Asset Growth

Investment Objective

The investment objective of the Fund is to provide capital growth over Rolling Periods of 5 years in excess of the Cboe UK All Companies Index and in line with or in excess of the Consumer Price Index, in each case after charges.

Fund Attributes

Investor Profile

Key Details

Target Benchmark Cboe UK All Companies, UK CPI
Comparator Benchmark (Sector) IA Flexible Investment
Launch date 1st April 2004
Fund value 80.2 million (GBP)
Holdings 36
Valuation time 12pm
  1. Past performance is not a guide to the future
  2. Data as at 29th February 2024

Fund Ratings

Fund Commentary - February 2024

As has been the case for the past few months, the direction of markets in February was, initially at least, guided by central banks meetings and inflation releases. On the last day of January, the message from the US central bank was clear: inflation remains elevated and greater confidence that it moves sustainably lower is required for interest rates to be cut. Similarly, the Bank of England stated in February that more evidence that inflation is falling is the condition for a looser monetary policy. Central banks continue to manage investors’ expectations and leave their options open.

In terms of the hard data, while the drop in inflation in the Eurozone was good news, it fell less than anticipated in the US and remained unchanged in the UK -albeit lower than expectations-, validating central banks’ caution. Growth data, meanwhile, highlighted the growing divergence between the US, which reported another set of strong monthly payroll numbers (twice as high as expected) and the rest, with the UK and Japan, for example each entering a technical recession in Q4 2023 (reported with a lag -hence the Q4 data- and defined as two successive quarters of GDP contraction).

Sticky inflation and an attempt at cooling down predictions of upcoming interest rates cuts saw government bond yields (which partially reflect expectations of where future interest rates are going to be) rebound from the previous month. As yields move inversely to prices, this led to a difficult month for bonds. To put the moves in February into context, for both the US and the UK, investors priced in two fewer interest rates cuts for 2024 in February compared to January. Those adjustments have been common in recent months and are part of the transition period from the years of zero interest rates to a situation where inflation might cause more of a headache for policy makers and market participants.

What was somewhat different in February was the divergence of performance between bonds and equities. While the prospects of less accommodative monetary conditions or a delay to monetary easing would have, until recently, sent equities lower alongside bonds, this was not the case last month. After a weaker start to the period, global equities managed to record good performance. US markets reflected the American exceptionalism we mentioned earlier and continued to lead, but Japan also showed strength as its equity market is finally regaining the all-time highs it last reached in 1984. Emerging markets benefitted from a rebound in China where expectations continue to build that the authorities will step up their measures to support the economy and financial markets. The UK exceptionalism of late was also at play unfortunately, with its equities lagging the rest of the world and delivering a flat month. As for commodities, it was a mixed month with stronger oil markets but a more challenging environment for metals reliant on Chinese demand.

 

 

In February, the WS Wise Multi-Asset Growth fund was flat, behind both the CBOE UK All Companies Index (+0.5%) and its peer group, the IA Flexible Investment Sector (+1.7%). Despite good performance elsewhere, conditions remained challenging in UK listed securities and investment trusts, in particular. This impacted our Fund’s overall performance with discounts on our investment trusts widening or remaining wide. The sector is currently facing headwinds from continued outflows in UK equities, higher interest rates making some income-oriented strategies less appealing, competition from strong performers, such as US equities, and a regulatory regime forcing a double-counting of fees, which, although being actively reviewed by the government and regulators, is yet to be corrected and thus remains unhelpful. It is encouraging, however, to see a sharp step up in activity from boards to address some of investors’ most pressing concerns in investment trusts, such as sub-optimal trust sizes or abnormally wide discounts. As a result, corporate activity is increasing via mergers, acquisitions or share buybacks which will, ultimately, strengthen the sector and leave it in a position to continue to offer a unique and desirable structure for retail investors looking to access less liquid asset classes and strategies.

One such transaction in our Fund last month was the acquisition of Arix Bioscience by RTW Biotech Opportunities (added to our portfolio last spring). The Arix’s portfolio comprised of 45% in cash with the rest invested in biotechnology companies complementary to the RTW portfolio. It suffered from idiosyncratic issues leading its shares to trade at a wide discount and its shareholders to look for a way to realise some of the embedded value in the trust. The acquisition by RTW, approved by shareholders in February, allows RTW to access quality assets as well as cash it can readily deploy into a very attractively valued sector. It also gave the trust immediate scale (from ~£280m market capitalisation on the announcement of the deal to £412m at the end of February) which is critical in order to attract new investors and help reduce the discount of ~30%. Given some complexities in the proposed deal, we had waited for completion before adding to our position but did so on a dip mid-month after confirmation of the vote. This deal is a good illustration of the opportunities thrown up by the current difficult market conditions within the investment trust sector. We are confident that these sorts of opportunities will reward patient investors.

 

 

Other than the addition to RTW above, we also added to Ecofin Global Utilities and Infrastructure which saw its discount widen again to 20%, unjustified in our view for a portfolio of listed equities in defensive sectors such as utilities, infrastructure and transportation. Those purchases were financed by taking small profits in a number of names such as BlackRock Frontiers, Mobius Investment Trust, GLG Undervalued Assets, Pantheon International, TwentyFour Income, European Smaller Companies, Oakley Capital and AVI Global Trust. We also took some profits, at the end of February, in International Biotechnology Trust which, like RTW Biotech Opportunities, has started to benefit from the recovery in the biotechnology sector we have positioned for over the last few months. That recovery is only nascent though and the trust’s discount remains too wide, so this trim is not a reflection of a change in conviction but rather of our risk management discipline.