The performance chart above illustrates how various asset classes have performed in the first four months of 2023. It shows the performance of some of our benchmark funds in each of the main asset classes.

Despite substantial volatility in investment markets, both equity and bond markets moved higher while alternatives and Irish property weakened over the period.

Key Highlights:

Bonds

While bonds have gone through a period of market turbulence they ended in positive territory. Corporate and government bonds performed similarly. Expectations that interest rates will peak in the next couple of months are fuelling confidence that the worst is behind bond markets. Our decision to move our model portfolio weighting from underweight to neutral has helped the relative performance of our model portfolios over the period.

Property

Property funds have been flat to mildly negative. The higher interest rate environment looks as if it is finally proving to be a headwind for the asset class as it has underperformed bonds, equities and multi-asset funds over the period. Our decision to move our model portfolio weighting from overweight to neutral has helped the relative performance of our model portfolios.

Equities

Equities finished the first four months of the year in positive territory, notwithstanding underlying market volatility. They had a very strong start to the year as market expectations of interest rates peaking, and recessions being mild, helped boost confidence. However, in March, heightened concerns around the banking sector saw some of the early-year gains erased.

A rebound in the euro versus the dollar also limited gains. Smaller company equities have started to rebound from their 2022 lows, while emerging markets equities struggled on a relative basis despite looking inexpensive versus the broader market.

Of all the asset classes we invest in we believe equities have the strongest long-term growth prospects. However, we currently hold a neutral weighting in equities as we wait to see the impact of economic slowdowns/recessions on corporate profitability.

Multi-Asset Funds

 Multi-asset funds moved marginally higher. Bond and equity assets have been positive contributors, but their weightings to alternatives and property have been detractors.

The 2022 falls in equity and bond markets (typically the two biggest components of multi-asset funds) have made multi-asset funds look relatively more attractive and our house view is becoming increasingly more optimistic for these types of investment vehicles.