Fund Return 2022-2023
Fund return to 28 February 2023
Fund
|
Performance
|
|
1 month
|
Scheme Year to Date
|
1 Year
|
|
|
|
|
CERS Multi Asset
Fund
|
-0.8%
|
-1.9%
|
-2.0%
|
CERS Bond Fund
|
-4.6%
|
-16.0%
|
-29.1%
|
CERS Cash Fund
|
0.1%
|
0.1%
|
-0.2%
|
CERS Equity Fund
|
-1.5%
|
-3.0%
|
-6.0%
|
CERS Property Fund
|
0.0%
|
-3.2%
|
-3.1%
|
CERS Alternative
Asset Fund
|
-0.2%
|
-0.2%
|
4.1%
|
Investment Commentary
Provided by Mercer - CERS Investment Adviser
Market Developments
Markets
started 2023 on an optimistic note. Equities, bonds and alternatives generally
rose. Rates and spreads declined and equity market volatility fell to its
lowest level in almost a year.
Positive
market sentiment was helped by US CPI inflation falling for the sixth month in
a row. It also seems to have peaked in other developed countries. Investors are
still hoping for an end to the monetary tightening cycle, even if central banks
remain cautious. Consumer confidence also improved over the month, as the
University of Michigan consumer sentiment index unexpectedly rose to the
highest level since April 2022. Forward-looking purchasing manager indices rose
in the US, although remained in contraction territory. In the UK and Eurozone,
purchasing manager indices also edged higher, as a sharp decline in natural gas
prices raised hopes that Europe will avoid a deep recession. Existing
home-sales, car sales and retail sales on the other hand hinted at an ongoing
economic slowdown. Additionally, a
number of high profile lay-offs were announced by large US companies.
Equity
returns were strong on receding inflation and falling interest rates.
Fundamentals were otherwise unfavorable. The first month of the 2022Q4 earnings
season yielded disappointing results from a number of companies in a quarter
that could see its first decrease in earnings since 2020Q3. Analysts still
expect low digit positive earnings growth for 2023 as a whole.
10-year
yields in developed countries fell by 20-30 basis points over the month which
led to positive returns for defensive fixed income. Falling credit spreads,
especially for high yield, were an additional return boost for credit.
Inflation expectations in the US, as measured by the 10-year break-even rate,
fell to 2.2%, now slightly below the Federal Reserve’s long-term target. Falling yields and thus lower opportunity
costs for holding gold were a tailwind for the metal which increased by over 6%
during the month.
Downward
momentum for the US dollar continued as it weakened against most major
developed and emerging market currencies. Investors continued to price in
falling US inflation and therefore a slower pace of monetary tightening in the
US.
Commodities
prices were mixed over the month with oil and some industrial metals slightly
higher and wheat lower. The global slowdown is expected to be a headwind for
commodities going into 2023. Some of this could be offset by China’s reopening,
which could lead to stronger demand for commodities.
Outlook
Global
economic activity is likely to remain weak in 2023, although downside risks to
economic activity have perhaps diminished on the back of the decline in
European natural gas prices and an imminent sharp recovery in China, as the
government rolled out a package of measures to support the property sector and
largely ended COVID restrictions.
As
we have seen elsewhere, the end of COVID restrictions leads to a pickup in
economic activity as consumers splash out on activities that have been
restricted like tourism and retail/entertainment. Chinese economic activity
will also be boosted by the property sector support and broad monetary and
fiscal policy loosening. The recovery in China will support trade partners and
especially Chinese tourism destinations, who would otherwise be under pressure
from the ongoing weakness elsewhere. The Japanese economy should have a better
2023, boosted by its COVID reopening and the recovery in China.
Inflation
should fall sharply as past rises in commodity prices fall out of YoY
comparisons, although the Chinese re-opening creates some upside risks to
commodities. It remains to be seen whether inflation will fall back to 2%
targets and central banks will remain hawkish until they are confident it will
remain moderated. Nonetheless we are expecting most central banks, including
the US Fed to pause their hiking cycles in 2023H1 to assess what impact the
past 12 months of tightening has had.
We
made no material changes to our asset class preferences, continuing to prefer
growth fixed income assets (high yield, loans and EMD) to defensive fixed
income assets and cash. We remain neutral equities. While further declines in
inflation should support equities, we think corporate profit growth will be
flat or negative in the developed world in 2023 and into 2024 and that market
expectations of the Fed cutting rates before the end of 2023 are premature.
Within equities we moved overweight emerging market equities as we expect the
recovery in China, the pullback in the US dollar and more favourable valuations
to support the asset class.
Notes
Scheme Year to date performance is the period from 1 June 2022 to the most recent month shown.
- 1 Year performance is the cumulative performance of the last 12 months to the most recent month shown.
- Multi Asset Fund performance assumes no lifestyling.
- Performance shown is net of annual management charge.
- The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
Before you choose a fund we recommend that you speak to a financial adviser. The CERS Trustee preferred financial adviser is Milestone Advisory DAC. You can contact them or your own financial adviser to assist you to review your investment choices. You can contact Milestone Advisory DAC via the website (www.milestoneadvisory.ie), by post: Linden House, 4 Clonskeagh Square, Clonskeagh Road, Dublin 14, D14 FH90, by email (info@milestoneadvisory.ie), or by phone (01) 406 8020. Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.
If you require further information please contact the CERS Team at info@cers.ie