Global equities ended the quarter in negative territory once again. It was a tale of two halves as global equities rebounded at the start of the quarter before reversing course midway through due to increasingly hawkish commentary from central banks amid elevated inflation and concerns around economic growth. In this environment, real assets produced negative returns as well, particularly global real estate.
In terms of relative positioning, the fund maintains a tilt towards Natural Resources. In turn, the fund is modestly underweight Infrastructure and global REITs.
The infrastructure component of the fund favours assets with high revenue certainty, profitability, and lower volatility. The strategy remains biased towards Europe in reference to more favorable valuations. Stock selection drove returns with positions in European and UK utilities were negatively impacted by concerns around recession risks and the energy crisis in the region.
The real estate component of the fund favours higher quality real estate and generally looks to invest in property types experiencing real cash flow growth, with strong balance sheets and managed by skillful teams. Stock selection remains the primary driver of returns. The strategy continues to favour apartments, manufactured homes, self-storage, and industrial properties.
The Resources component focuses on Clean Energy, Water, and Agriculture. Resource scarcity is a fundamental underpinning of the strategy, which invests in companies providing solutions to demand, supply, and efficiency in the provision of food, energy, water, as well as mitigation and adapting to the impact of climate change. Positive stock selection and allocation decisions in Materials were the largest contributors to performance. The overweight in Utilities, which were negatively impacted by rising rates, and large underweight in Energy, as the fund does not hold oil and gas related companies, detracted from relative performance.