An investment melting pot

Fund performance was broadly positive in May, driven by recovering global share markets and positive returns from bonds. As this economic cycle matures, investors are becoming increasingly focused on bottom-up investments and themes, rather than broad market moves. This is generating significant volatility in individual company shares, even as market indices remain stable.

Global share markets recovered much of April’s losses in May, but it was a narrow performance with only a small number of companies driving headline gains. Some of our investments delivered standout monthly returns, including semiconductor company Micron Technologies (up 10.7%) as well as electronic broker Interactive Brokers (up 9.4%). In a volatile share market, we continue to value strong, steady performers that can anchor our funds via larger positions. A number of these companies’ shares have accumulated significant performance of late. For example, healthcare stocks HCA Healthcare (up 9.7% in May and up 25.8% YTD) and Elevance (up 1.9% in May and up 14.6% YTD) as well as UK banks NatWest Group (up 3.8% in May and up 50.5% YTD) and Bank of Ireland (up 11.1% in May and up 35.8% YTD).

New Zealand shares continue to be an underperformer, as a weak domestic economy is further pressured by a Reserve Bank determined to keep interest rates elevated. In this context, it was pleasing to see large holding Contact Energy rally 6.3% last month on news of a significant extension to the life of the aluminium smelter at Tiwai Point.
Global bond markets also recovered in May, with the performance of our bond holdings reflecting the high yields we are earning from our holdings. We continue to focus our investments in shorter-term bonds that offer higher yields and can benefit from any interest rate cuts over the coming months.

The outlook remains uncertain, whilst still offering a solid backdrop for returns. Diverging economic growth, inflation and central bank policy around the world is creating opportunities across shares, bonds and currencies. Meanwhile, risks around policy are rising as we approach the US election in November. We continue to try and manage these risks whilst focusing on enduring bottom-up investment themes.