September, 2023
Markets became increasingly convinced of the ‘higher for longer’ narrative on US interest rates over the month, putting upward pressure on US Treasury yields and downward pressure on risk assets. Against this backdrop the portfolio generated a negative return. Equity positions were the largest detractor, driven by losses in the US. In fixed income, although credit spreads held up well, income generation was unable to counterbalance the negative price action caused by the rise in yields. Our infrastructure positions also struggled in the higher yield environment. Alternatives performed well, particularly currency related relative value trades and dividend futures. We increased our commodity exposure given a slower than expected decline in inflation, maintaining equity and credit exposures at levels just below historical averages. With some positive signs emerging in US manufacturing activity, we added option-based positions that would provide exposure to any meaningful bounce in equity markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/205846137.pdfJuly, 2023
Risk assets performed well in July as optimism grew that central banks, especially the Fed, may be able to navigate a ‘soft landing’. The portfolio generated a strong positive return, driven by our broad equity holdings, especially the US and emerging markets. These gains were further boosted by option-based positions designed to capture upside in key markets.
In fixed income, yields drifted upwards, resulting in a negative contribution from our government bond positions, but this was more than offset by gains in investment grade credit, high yield and emerging market debt, leading to a positive performance overall. Our infrastructure positions recorded a small negative performance, but this was counterbalanced by gains from our commodity exposures as oil prices moved upwards. The dividend futures positions we added to in recent months delivered a further positive contribution. We added to some credit positions and edged up our commodity holdings given a more constructive outlook.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/203219048.pdfJune, 2023
Despite an upward move in rate expectations, risk markets rallied in June, helping the portfolio deliver a positive return. Our equity exposures made the largest contribution to performance, particularly positions in the US and Asia. We increased our aggregate equity exposure, closed a UK versus global equities relative value position and added positions to capture upside in some laggard European and emerging equity markets. Dividend futures were a further positive, benefitting from the more constructive risk backdrop. In fixed income, returns were more mixed, with our holdings in government bonds, high yield credit and emerging market debt delivering positive returns, but investment grade credit a small detractor. Infrastructure holdings detracted from performance and, although we continue to believe the sector has long-term value, we reduced our position in the short-term. We continued to add defensive option structures on a range of equity markets to protect against mild risk pullbacks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/202536479.pdfMay, 2023
Divergences are becoming extreme in both economic activity and asset price performance. High and persistent inflation created a choppy environment for most asset classes in May as market participants were left struggling to assess where the terminal level of rates would be. Against this backdrop the portfolio delivered a small negative return. Government bond yields rose as rate expectations were repriced and, although there was some relief following the resolution of the US debt ceiling standoff, this led to a negative performance from our fixed income holdings. In real assets, there was a pullback in infrastructure prices, and, although losses were limited by our low exposure, a sharp decline in commodity prices detracted from returns. Dispersion in global equity markets was wide, with gains in the US and Japan counterbalanced by losses in Europe and emerging markets. Our total return strategies proved resilient, with positive contributions from dividend futures, commodity carry positions and option-based positions built to benefit from softer markets.
File:April, 2023
Concerns about the likely impact of US banking sector stresses has seen expectations for further interest rate hikes cut back, although high and sticky inflation puts the ECB and possibly the Bank of England on track to continue the hiking cycle well after the Fed take a pause. Whether we are at the genuine end of the tightening cycle, or this is simply a premature pause, means the range of possible investment outcomes over the next few months appears wider than usual. We are maintaining a well-balanced portfolio, using our total return strategies as an additional source of diversification, and reshaped our relative value positions in both equity and currency markets.
The portfolio delivered a positive return over April. Our alternatives exposures contributed most, with our Infrastructure holdings bouncing back and our total return strategies posting another positive month. Our traditional exposures to equities and fixed income were also positive contributors.
File:February, 2023
After a strong start to the year, both bonds and equity markets experienced a reversal in February as economic activity and inflation surprised on the upside. The prospect of higher terminal rates and a longer wait for monetary policy easing pushed yields upwards, weighing on our fixed income holdings. Our broad equity positions, in aggregate detracted from performance, with emerging markets performing poorly in the face of higher rates, but European (including UK) equities a bright spot. Positions designed to capture relative value between UK small and large cap stocks and European versus US equities performed well. Our diversifying currency based relative value trades also gained, as did option-based strategies designed to capture equity market weakness. In real assets, both our infrastructure and commodity holdings were small detractors to performance. We tactically edged our equity exposures higher, reduced government bonds and added defensive structures on a range of equity markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/198080314-1.pdfJanuary, 2023
After a strong start to the year, both bonds and equity markets experienced a reversal in February as economic activity and inflation surprised on the upside. The prospect of higher terminal rates and a longer wait for monetary policy easing pushed yields upwards, weighing on our fixed income holdings. Our broad equity positions, in aggregate detracted from performance, with emerging markets performing poorly in the face of higher rates, but European (including UK) equities a bright spot. Positions designed to capture relative value between UK small and large cap stocks and European versus US equities performed well.
Our diversifying currency based relative value trades also gained, as did option-based strategies designed to capture equity market weakness. In real assets, both our infrastructure and commodity holdings were small detractors to performance. We tactically edged our equity exposures higher, reduced government bonds and added defensive structures on a range of equity markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/198080314.pdfDecember, 2022
Across a breadth of asset markets, performance took a sharp downward turn in December with equities, credit and government bonds all negative. Against this backdrop the fund generated a negative return, despite our low level of cyclical exposure. Our broad equity positions were the main detractor from returns, although our relatively low exposure helped to contain losses. We edged our exposure further downwards, maintaining a preference for markets that we believe are less vulnerable to corporate earnings downgrades in the year ahead. Rising yields and widening spreads negatively impacted our fixed income positions, but we took advantage of higher yields to build credit positions. Our commodity holdings were broadly flat, as were our infrastructure holdings where broader gains were offset by idiosyncratic events that negatively impacted two holdings. Absolute return exposures contributed positively, and we added positions designed to benefit from more rangebound conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/195245186.pdfNovember, 2022
The portfolio delivered a strong positive return for the month. A lower-than-expected US inflation print saw markets reduce expectations for the pace of future US policy tightening, triggering a broad rally in equity markets. We increased exposure to equity during the month, which helped returns and our equity holdings were the largest positive contributor to performance. In fixed income, we added to duration and increased exposures to investment grade credit and high yield. This helped the portfolio to benefit from a material decline in yields.
We closed our long US dollar positions within total return strategies early in the month, which protected the portfolio from a sharp decline in the dollar later on. Option positions designed to benefit from a rally in key equity markets also helped buoy returns. Infrastructure and commodity holdings generated small gains. With a still cautious view of the cyclical backdrop, we used derivative strategies to build buffers against mild pullbacks if the risk environment worsens.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/193244523.pdfOctober, 2022
Equities and other risk assets recovered ground in October on hopes that rate markets had largely priced in ‘peak’ interest rates. Against this more constructive backdrop the portfolio generated a positive return. Our equity exposures contributed positively, with gains in developed markets partially counterbalanced by a small detraction from emerging markets. Positions designed to benefit from certain markets trading within ranges also buoyed returns. US government bond yields continued to rise and, although our limited position helped to limit losses, fixed income positions detracted from returns. A bounce in commodities, especially energy, and infrastructure prices provided a positive contribution from real assets. Relative value trades, primarily related to further dollar strength and flatter yield curves, gave back some of their recent profits. Our asset allocation remains defensive, with a low equity exposure by historical standards and a high exposure to alternatives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/192770659.pdfSeptember, 2022
In a year that has already been challenging for most asset classes, September witnessed some of the most extreme moves so far. Against this backdrop the fund generated a negative return. The breadth and severity of equity market declines meant, despite our relatively low equity exposure, it was the largest detractor. In fixed income, notwithstanding increasing fears of recession, government bond yields backed up aggressively, generating losses despite our low duration.
Having already removed high yield and emerging market debt holdings, this insulated the portfolio from significant spread widening in both asset classes. Defensive option-based trades along with currency and equity based relative value trades generated a positive return. Throughout the month we further reduced cyclical exposures including via equities, trimmed our long US dollar exposure and used market volatility to add further defensive option-based positions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/191654760.pdfAugust, 2022
Bonds, credit and equity markets all weakened in August as central banks pushed back on hopes that a peak in inflation would result in a dovish pivot. Against this backdrop the portfolio generated a negative return. Our equity holdings were the main detractor, partially counterbalanced by positions designed to benefit from certain markets trading softer. Rising developed market yields negatively impacted our government bond holdings but our limited position, and zero exposure high yield credit and emerging market debt, helped to limit losses.
We added to Chinese government bond holdings given the divergent outlook for monetary policy in China. A negative return in commodities was more than offset by gains from our infrastructure holdings. Our efforts to seek out alternative sources of diversification proved effective, with relative value currency positions performing well. We continue to position defensively, given the challenging outlook for most traditional assets, and increase exposure to alternatives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/191060887.pdfJune, 2022
● Based on core principles of diversification, dynamic asset allocation and downside risk management
● Combines actively managed directional risk (aiming to make money when markets go up) with actively managed less directional sources of return (aiming to make money whether markets go up or down)
● Exposure to equity, fixed income, real assets, total return strategies and cash
● Managed by a highly experienced team, with a transparent investment process and proven track record
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/188941656.pdfMay, 2022
Based on core principles of diversification, dynamic asset allocation and downside risk management
● Combines actively managed directional risk (aiming to make money when markets go up) with actively managed less directional sources of return (aiming to make money whether markets go up or down)
● Exposure to equity, fixed income, real assets, total return strategies and cash
● Managed by a highly experienced team, with a transparent investment process and proven track record
Tightening financial conditions, uncomfortably high inflation, and mixed evidence as to whether the moderation in growth was sufficient to quell inflationary pressures created a difficult backdrop in May. The portfolio generated a small negative return. Equities were the largest detractor, despite us holding a below-average exposure, as markets experienced precipitous declines in the early part of the month. This was partially offset by option-based trades designed to benefit from certain markets trading softer. Fixed income also detracted, as hawkish central banks kept upward pressure on yields, although this was limited by our low duration and low exposure to credit. Commodities gained for another month, led by energy, but some infrastructure holdings were negatively impacted by concerns that UK windfall taxes could include renewables. Activity was focused on adding option positions designed to capture a rebound in certain equity markets, edging up duration and adjusting relative value trades in currencies.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/188100673.pdfApril, 2022
April continued a challenging start to the year for many asset classes; equity and fixed income markets experienced notable drawdowns, and US assets were particularly weak. Against this backdrop the Fund had a negative performance. Although we had reduced exposure from the start of the year, equities were the largest detractor, partially offset by option-based positions designed to benefit from drawdowns in key markets. Rising yields, driven by a more hawkish tone at major central banks, led to losses in fixed income, but our small positioning and limited duration helped contain this.
An important ballast to these negatives came from our commodity exposure, with energy and agricultural prices driving another month of strong returns. Infrastructure, particularly renewables-focussed holdings, also gained, as did the currency based relative value trades we had added in recent months, providing the defensive characteristics we had targeted. We further reduced our cyclical exposures during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/187001867.pdfMarch, 2022
Based on core principles of diversification, dynamic asset allocation and downside risk management
● Combines actively managed directional risk (aiming to make money when markets go up) with actively managed less directional sources of return (aiming to make money whether markets go up or down)
● Exposure to equity, fixed income, real assets, total return strategies and cash
● Managed by a highly experienced team, with a transparent investment process and proven track record
After a challenging start to the year, risks assets stabilised and recovered some lost ground in March, helping the portfolio generate a positive return. Our US and Asian equity holdings made notable gains, as did option-based positions targeting gains in US equities and a sideways move in European markets.
Government bonds detracted from performance as yields moved upwards in anticipation of tighter central bank policy, but our small position limited loses. Credit spreads tightened, benefiting our high yield and emerging market debt positions but the diversifying relative value currency positions that we added in recent months gave back some profits. Both our infrastructure holdings and commodities exposure performed well. We reduced our commodity exposure following a period of very strong gains and added to our equity positions. We also added a number of option positions designed to benefit from a sideways move in US and UK equity markets, and upside in Japanese equities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/185996445.pdfFebruary, 2022
February was dominated by an escalation in tensions between Russia and the West following President Putin’s decision to launch a full-scale invasion of Ukraine. Despite being another challenging and negative month for many asset classes, having already reduced our equity holdings and increased our commodity positions, the portfolio experienced only a modest negative return; the drawdown in equities outweighing a surge in energy and agricultural prices. In fixed income, building inflationary pressures and the prospect of tighter central bank policy weighed on our government bond positions, but gains in Chinese government bonds counterbalanced this to a degree. Defensive relative value trades in currencies, and equity option positions designed for range trading markets, were positive contributors, providing the diversification benefits that we had been targeting. With geopolitical risks likely to remain heightened for some time, we further reduced equity risk, added a number of defensive positions within total return strategies and increased our commodity exposures.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/185007464.pdfSeptember, 2021
The spending pulse spurred by economies reopening is fading and, although the economic backdrop still appears solid, the market environment has become choppier. Most markets declined in September, with the notable exception of Japanese equities. The portfolio generated a negative return over the month, with our equity exposure the largest negative contributor. With supply constraints proving more stubborn and widespread than initially envisaged, inflationary pressures are yet to dissipate, and bond yields drifted upwards. This negatively impacted our government bond and emerging market debt positions, with the latter also suffering from a stronger US dollar. High yield credit was broadly flat. Rising energy prices benefited our commodity holdings and our relative value currency positions also delivered positive returns. We continued to edge our cyclical exposure lower, reducing emerging market debt holdings and adding positions designed to benefit from market pullbacks
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/180191304.pdfJuly, 2021
The portfolio generated a small positive return in July, against a backdrop of strong economic data, but there were some signs that activity was starting to moderate. This moderation proved positive for fixed income markets, and our government bond positions performed well, boosted by gains in high yield and emerging market debt. Our commodity holdings and infrastructure assets also added to returns. Developed market equities rallied, supported by a rebound in earnings and further lockdown easings, but emerging markets were negatively impacted by concerns about the spread of the delta variant. This was compounded by a regulatory crackdown in China, leading to a negative contribution from our equity positions in aggregate. With the strongest period of economic acceleration seemingly passed, and after a period of strong gains, we reduced our commodity and equity exposures. We have also implemented several option strategies that would benefit if equity markets were to weaken.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/175715259.pdfJune, 2021
Against a backdrop of economic strength, vaccination progress and both monetary and fiscal support, risk assets had another solid month. We came into June with a relatively high equity weighting and this was a key driver of performance. A resurgence in US equities buoyed our broad equity holdings, and option-based positions designed to benefit from moderately rising markets generated additional gains. With valuations now more challenging we added positions designed to benefit should we see periods of moderate weakness. Government bonds were relatively stable, leading to small positives from US and European holdings. US high yield and investment grade credit both performed well, and with further upside in investment grade credit likely to be limited, we used this as an opportunity to sell our remaining exposure. We added to our commodities position and the broad complex continued to grind higher. Our infrastructure holdings were a small negative as new issuance undermined short-term pricing
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/174211391.pdfMay, 2021
In May, the portfolio’s pro-cyclical positioning, against a backdrop of improving economic activity, helped to deliver a strong return. Our developed market equity holdings made notable gains, buoyed by option positions designed to benefit from gains in laggard European markets. With economies reopening and construction activity gaining traction, industrial metals and energy prices continued their upward trend, benefiting our commodity holdings, and we edged our exposure higher early in the month. Developed market government bonds were broadly flat but gains in emerging market debt allowed us to generate a positive return from this component in aggregate.
Our infrastructure holdings continued their positive momentum, with renewable energy and social infrastructure exposures the main contributors. We added to one holding via an equity fund raising where the capital will be deployed in sectors enabling decarbonisation including energy efficiency and battery storage.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/172773357.pdfJanuary, 2021
Pro-risk sentiment dominated the first half of January, fuelled by optimism around increased fiscal stimulus in the US and the commencement of vaccine deployment. However, risk assets experienced a sharp pullback into the end of the month as retail investors engineered a short squeeze on a small number of stocks. Against this background, the portfolio delivered a small positive return. Our equity allocation was positive, driven by gains in the first half of the month and buoyed by option trades designed to benefit from rising US and European equity markets. Commodity holdings also gained as industrial metals and energy benefited from an improving cyclical outlook. Rising yields negatively impacted our fixed income holdings, and this also resulted in a negative performance from a relative-value position on US credit spread compression. We tactically added option-based structures to take advantage of increased volatility premium, creating wide ranges within which we could profit.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/165060355.pdfasset_class: Multi-Asset
asset_category: Real Return
peer_benchmark: Multi-Asset - Real Return Index
broad_market_index: Multi-Asset Growth Investor Index
manager_contact_details: Array
ticker: ETL0396AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
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fund_features:
Insight Diversified Inflation Plus aims to deliver positive long term returns of 5% p.a. in excess of inflation over a rolling 5 year period. The Fund seeks to deliver its objective through a dynamic asset allocation strategy involving several asset classes (including equities, fixed income securities and cash as well as commodities and property), primarily through direct investments, financial derivative instruments and investments in collective investment schemes.
structure: Managed Fund