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Performance Monitor - To 31 July 2021

Update on Portfolio Performance from our DFM Partners, Cape Berkshire Asset Management.


The month felt like a battle to keep numbers close to a positive with the new key factors being the sudden risk-off to China, after its ban on profit-making on many elements of its tech sector and inflationary jumps. With our global holdings, I don't think we were hugely exposed to this but from our side, we feel it's another reason to hold our bullish view on India, who we see getting an uplift from this which again feels like a test of the true capitalisation of the Chinese market.

We have elected not to chase inflation-linked bond outperformance at this point but remain cognisant of it being an alternative to our corporate bond over government positioning. We think the early days of August have reminded us of the need to be patient with many of our potential over weights to review, like UK midcap for example having another strong week at the point we had felt vs sectors of the US it could be a time to reduce. We definitely still have client assets positioned to benefit from a controlled economic recovery with no drastic inflationary shocks or COVID related extremities. The 1-year numbers and especially our performance since November 2020 are still a reminder of how far valuations have jumped, resulting in what we hope is a pleasing performance across portfolios. What will we most lookout for in the coming weeks? Definitely inflation readings as these present a risk of increasing US yields as the central bank moves to contain inflation which would still be a major worry to both the bond and equity parts of the portfolio. New programs like the REPO management tools do still give comfort to the global economies' abilities to be creative.

Mark Insley, Managing Director - Cape Berkshire Asset Management & Consulo Wealth Solutions

CBAM Portfolio Performance

*These tables simply indicate CBAM's portfolio's over the stated time periods up to 31/07/2021.

**V2 versions of the portfolios use the identical asset allocations to V1 using Mutual Funds instead of Exchange Traded Funds on the basis of client size and client preference.

Note From The Investment Team

July portfolio returns ranged from CBAM1 returning 1.11% to CBAM5 V2 returning -0.49%. We saw a wider spread in portfolio performance of 1.60% given the largely risk-off sentiment on covid delta variant, inflation pressures and China tech regulation anxiety spilling over to global markets. Inflationary concerns seem to remain a resilient part of the markets conversation which would see strong performance from inflation linked securities on the month and bond yields continuing to fall in a fixed income rally. This would see UK and US yen year bond yields down to 0.57% and 1.24% respectively in a risk-off environment. Emerging markets experienced headwinds as China regulators unexpectedly cracked down on online education companies baring them from going public, raising capital or making profit triggering a broader market sell off. The course of the month would also see increased market concern on the outbreaks of a more transmissible delta variant and the detrimental effect it might have on global economic recovery leading investors to retreat to safe havens in the fixed income and gold markets. Given the risk-off environment both physical gold and miners were up on the month with gold breaking above, and subsequently retreating below, $1,800/ounce. Brent crude prices retreated below $70/barrel as OPEC+ agreed to increase production relieving some inflationary pressure from energy prices. Given the backdrop of the above factors, over the month of July, the best performing funds were iShares Index-Linked Gilts, Allianz Continental European and Xtrackers Global Inflation-Lined Bond whilst the worst-performing funds were L&G Global Emerging Markets, iShares Global Clean Energy and iShares S&P Small Cap 600. We continue to closely monitor these and other developments that influence the performance of the portfolios on an ongoing basis.


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