Fundamentals

Fundamentals – Q1 2022

5 days ago

As the world reacted to the invasion of Ukraine, swift action was taken by the West to impose a range of crippling economic sanctions on Russia and its allies. As a result, Russian markets were suspended and became effectively inaccessible to investors, with assets in this region being written down to zero by most investors.

The war in Ukraine has also had the effect of destabilising the ongoing global economic recovery, with stock markets in Europe being more affected than in the US. Inflation was already a major issue before, however this has been exacerbated by the current conflict. Energy and commodity prices have spiked as markets assessed the cost of cutting out Russian supply chains, with the global energy sector up 26.2% over the quarter.

While bonds are usually seen as a ‘flight to safety’ during uncertain times, this was not the case during the recent sell-off. As inflation pushes higher, this increases the possibility of central banks taking action to raise interest rates rather than lower them. Cooling down inflation is now at the forefront of policymakers’ minds, as seen in the Bank of England’s decision to raise rates to 0.75% despite bleak economic conditions and a ‘cost-of-living crisis’. Because of this, bonds have suffered a poor quarter in total return terms, as global investment grade bonds are down -4.8%.

Alternative assets in industries like infrastructure have had a mixed quarter. Additional inflation protection played a positive role here, however some funds that have an investment focus in ‘green’ projects performed poorly.

Fundamentals update

This update is designed to keep you up to date with what’s been happening with our Fundamentals service to help support you with your investment research.

As a reminder, Fundamentals is designed to help you with your investment research and keep you up to date with the latest views from the AJ Bell Investments Team covering the funds and ETFs that the team think have the potential to achieve their stated objectives.

Changes to Fundamentals

Over the course of first quarter of 2022, there was one removal and three additions to the Fundamentals list:

Funds removed Funds added
Lyxor Core MSCI World ETF HSBC FTSE All-World Index Fund
  iShares MSCI World SRI ETF
  iShares Physical Gold ETC

Rationale:

Lyxor Core MCI World ETF (removal) – we had two passive funds tracking global developed markets and none encompassing both developed and emerging markets. As a result, Lyxor Core MSCI World was removed.

HSBC FTSE All-World Index (addition) – the fund has been added to give a passive option that tracks both developed and emerging markets. HSBC has a well-developed passive business and offer this fund for an OCF of 0.13%.

iShares MSCI World SRI ETF (addition) – the number of passive ESG options continues to evolve as demand for this type of investment increases. As a result, it now seems prudent to add a passive global tracking ESG option to the list. iShares and MSCI have a robust methodology and the ETF charges an OCF of 0.20% per annum.

iShares Physical Gold ETC (addition) – with uncertainty across global markets, the demand for gold has increased. As a result, we have added the iShares Physical Gold ETC to give an option in this area. It is physically backed and has an OCF of 0.20% per annum.

Meeting notes

One of the advantages of the Fundamentals service is the regular updates from the meetings the AJ Bell Investment Team have with the underlying fund managers. These will be updated at least once a year and many have been added over the last few months.

Over the quarter, 33 funds have been reviewed and had their commentaries updated. Take a look at the AJ Bell reports to see the latest thoughts of the fund managers, and our assessment too.

Funds updated in the past quarter  
Allianz Strategic Bond Invesco Asian
Artemis US Select JPM US Equity Income
Artemis US Smaller Companies Jupiter Asian Income
Baillie Gifford Global Alpha Growth Jupiter Japan Income
Baillie Gifford Japanese Lazard Emerging Markets
Barings Europe Select M&G Global Macro
BlackRock Continental European Income Polar Capital Global Insurance
BlackRock European Dynamic Polar Capital Global Technology
Blackrock Gold & General Schroder European
BlackRock UK Special Situations Schroder Global Equity Income
Evenlode Income Schroder Global Recovery
Evenlode Global Income Stewart Investors Asia Pacific Leaders
Fidelity Emerging Markets Stewart Investors Worldwide Sustainability
Fidelity Global Special Situations Threadneedle UK Equity Income
First State Global Listed Infrastructure Trojan Income
Franklin UK Mid Cap TwentyFour Corporate Bond
Franklin UK Smaller Companies  

AJ Bell reports

Each fund or ETF on the Fundamentals service has an AJ Bell report that is updated quarterly. This report contains key information on the fund or ETF such as the latest positioning, performance and risk data, charges and ESG data. All of these reports have been updated to help you with your research due diligence.

Other news

We are constantly researching the investment universe to ensure that the Fundamentals list contains a wide range of high-quality managers. Keep checking back on our website to see our latest ideas and updates.

We love to get your feedback so if you have any thoughts you’d like to share with us, please let us know.

HEAD OVER TO FUNDAMENTALS

 

Author
Profile Picture
Ryan Hughes
Name

Ryan Hughes

Job Title
Head of Investment Research

Ryan started his career in 1999 working for an independent financial adviser, progressing to become Head of Portfolio Management at an award-winning advisory firm. Moving on to a global asset management firm as a Fund Manager, he oversaw more than £10bn of multi-asset portfolios, and also sat on the Investment and Global Asset Allocation Committees. After seven years, Ryan joined a small multi-asset boutique managing portfolios for clients all around the world, before joining AJ Bell three years later to help establish our investment capability. As Head of Investment Research, Ryan now oversees all investment research covering active and rules-based solutions.

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