Q1 2020 Review and Outlook/media/Files/B... · − Q1 was an unprecedented quarter for markets, as...

Quarterly Market Outlook / April 2020 1

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Sterling-denominated market performance, 31.12.19–31.03.20 and 31.03.19-31.03.20, total return performance figures. Past performance is not a reliable indicator of future results. Source: Refinitiv, MSCI: please see important information.

Asset Market Performance

The first quarter of 2020 provided an unprecedented unfolding of events. It is hard to comprehend that words such as ‘lock down’, ‘quarantine’, ‘isolation’ and ‘social distancing’ should now have become part of our daily lexicon. As the COVID-19 / coronavirus pandemic has triggered a global response from governments, so too has this exogenous shock jolted financial markets out of their existing investment roadmap. COVID-19 threatens to tip global economic activity into recession with significant impacts to quarter-on-quarter growth rates. Against this, and alongside a healthcare response, policy makers have sought to limit the long-term damage to their economies. Neither monetary nor fiscal policy can prevent the inevitable near-term collapse in economic activity. But what such action can do is to both limit any long-term damage, as well as speed the recovery once normal economic and societal behaviour returns.

During the quarter, we have seen records set, both good and bad. We have seen equity markets reach new closing highs, only to be followed in record time with a sell-off into bear market territory. The sheer speed of this fall - the fastest in US history - suggests it has not been driven by active fund manager decision making. With the rise of algorithmic trading funds, for example, triggers are pulled by machines which can often end up compounding the very loss-scenario that they are seeking to avoid in the first place. As market volatility has spiked, this has also pushed up the cost of margin calls for hedge funds, and in turn put pressure to close positions

elsewhere. Against this, for those fund managers taking a longer-term view, it can be very difficult to take advantage with the extreme moves in risk assets even within a single day’s trading session.

As more timely economic reports have started to land, we have seen US weekly initial jobless claims rise almost twelve-fold to over three million and the highest since the data began. We have also seen central banks break from their traditional economic policy orthodoxy as governments press the button on helicopter money with direct cash transfers to their citizens. While we cannot know with any certainty when we might see the end of COVID-19, we do know that an end will come. The measures that governments are taking are having an impact on the speed and spread of transmission of the virus. At the same time, the monetary and fiscal policy steps being put in place will help economies to weather the storm.

For investors, now more than ever, it is important to remain disciplined in the current market environment. This is not a time for heroic swings of the investment bat. While markets have rivalled the speed of the virus in trying to price-in the near-term damage, they will also be very quick to act when a tipping-point is seen to be close-at-hand. As destructive as COVID-19 has been in both human and economic terms, with the efforts of policy makers, markets can still make a quick recovery. By keeping to an established and proven investment framework, we can look to take advantage of short-term volatility as we continue to seek out longer-term investment opportunities.

An unprecedented quarter for markets

− Q1 was an unprecedented quarter for markets, as ‘social distancing’ enters the daily lexicon

− Market records were made as volatility spiked, including the fastest fall in US shares in history

− As helicopter money arrives, traditional economic policy orthodoxy was re-written

− Now more than ever, it is important to keep to a disciplined investment framework

Quarterly Market OutlookQ1 2020 Review and Outlook

Financial markets started the year with a significant tailwind, with two key economic and political risks reduced at the end of 2019.

First, trade war tensions between the US and China had deescalated. This led to the signing of the first phase agreement between the two countries in January, and both agreed to start on broader phase two negotiations straight away.

Second, and closer to home, UK risk assets started the new year on the front foot, as the Conservative party won the largest majority in Parliament since the 1980s. UK-EU trade talks were on the horizon, but UK markets were still looking forward to a period of relative domestic political calm.

Markets were seeing a recovery in both manufacturing and services survey data. As companies reported their latest results for Q4 2019, they showed positive year-on-year earnings growth. Economic data was also supportive as US Industrial Production growth turned marginally positive in February.

Before COVID-19, an economic improvement was in train

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Q1 lag of 1Y % change of SEMICONDUCTOR MANUFACTURERS SALES, US (3m ave) (LHS)

1Y % change of INDUSTRIAL PRODUCTION - TOTAL INDEX : US (RHS)

Source: Refinitiv, SIA. Data to 31 March 2020.

Financial markets started the year with a significant tailwind

Last year, the Fed made three back-to-back ‘precautionary’ interest rate cuts considering the concerns around global trade growth. As a result, markets were starting 2020 with a much more accommodative monetary policy backdrop and the prospect of a sharply recovering earnings growth picture ahead.

Before COVID-19, markets had been expecting a very different roadmap for 2020

− Before COVID-19, markets had enjoyed a tailwind, with US-China trade tensions and UK political risks both receding

− Previous industry survey and economic data had been pointing to improving confidence

− The three back-to-back rate cuts from the US Federal Reserve (Fed) in 2019 had been supporting risk appetite

2 Quarterly Market Outlook / April 2020

The COVID-19 pandemic, which has dominated policy agendas during the first quarter, is a sharp reminder that even without underlying economic tensions, exogenous shocks can still arrive.

On 31 December 2019, the World Health Organization (WHO) received an alert. Several cases of pneumonia had been recorded in Wuhan City, in central China. The virus did not match any other known to science and was subsequently named COVID-19. This was a new strain of coronavirus: a family of viruses that include the common cold, as well as the 2002-2003 SARS virus.

While the COVID-19 pandemic would eventually cross six continents and over 180 countries and territories, markets were initially muted in response. Up until mid-February, investor stress was not broad-based, but targeted. Markets responded initially at a regional level, in Chinese and neighbouring Asian equity markets. At an industry level, attention was focused on those sectors most likely to be impacted, such as airline and travel companies.

At this time, US equity markets were still continuing to post record highs. While bond yields fell, credit market moves continued to be broadly muted. The consensus view was for a localised impact for China and neighbouring economies. While these countries would see some disruption, markets responded in a way that suggested the global economy would escape relatively unscathed - as had been the case in previous viral outbreaks.

The subsequent three weeks shocked the markets out of this roadmap. US equity markets fell into correction territory (defined as a fall of more than 10%) over just six trading sessions. In early March, markets fell further still into bear market territory (defined as a fall or more than 20%). US markets had breached this second barrier in just 20 trading sessions. It was the fastest such fall in US stock market history, beating the previous record of 36 sessions during the market crash of 1929. Quite clearly, the market interpretation of the economic impact of the COVID-19 pandemic had shifted onto the global stage.

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Source: Refinitiv, MSCI: please see important information. Data to 31 March 2020.

COVID-19 upsets the narrative

− A sharp reminder that exogenous shocks can arrive without underlying economic tensions

− Markets initially treat COVID-19 as localised shock, not a global threat

− As the spread of the virus takes hold, US markets see fastest fall into bear market in history

In early March, markets fell … it was the fastest such fall in US stock market history


With low emerging market growth, this is likely to hold back global growth. With muted growth and low inflationary pressures, interest rates are likely to stay low. The COVID-19 pandemic carries the risk of accentuating a weaker inflation outlook, and the market has seen a collapse in medium-term market expectations. In this environment, growth is scarce and, as such, is more highly valued by investors.

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31/03/14 31/03/15 31/03/16 31/03/17 31/03/18 31/03/19 31/03/20Source: Refinitiv. Data to 31 March 2020.

Source: Refinitiv. Data to 31 March 2020.

Through the first quarter, markets have endured remarkable levels of uncertainty. Despite this, our preferred thematic growth sectors of healthcare and technology have outperformed the wider market.

US inflation expectations. Inflation forward rates (%)

The COVID-19 pandemic has jolted normal economic and societal behaviour. Despite this, we feel that markets are in some ways still observing the same investment framework that was shaping decisions previously.

During the quarter, the Fed cut interest rates aggressively towards zero, reducing the interest rate differential between

the US dollar and other currencies. Nonetheless, markets have continued to seek out the US dollar because of its safe-haven status in times of uncertainty. This dollar strength still acts as a brake on emerging market growth in two ways. First, because it can discourage capital inflows into emerging markets. Second, it can raise the cost of dollar-denominated debt that emerging market countries hold.

Before COVID-19, investment outlook had been resting on five pillars

Source: Brooks Macdonald. Gavekal. 31 March 2020.

Is the market’s investment framework surviving COVID-19?

− Despite COVID-19 and market uncertainty, are markets still observing the same framework?

− As global growth was impacted, markets continue to seek out areas of longer-term growth

− Technology and healthcare sectors outperformed the market during the quarter


As governments have followed the example set by China’s healthcare response, markets have focused on the monetary and fiscal levers as they seek a pressure release valve. Both are important, but they don’t act with the same speed.

Central banks acted first with their traditional interest rate monetary policy tool. With two unscheduled meetings during March, the Fed cut rates first by 0.5% and then by another 1%. In less than a year, the US interest rate policy range has fallen from 2.25-2.5% to close to zero, at 0-0.25%, a level not seen since 2015.

Central banks around the world have also responded, including the Bank of England (BoE), which has cut rates to 0.1% (across two meetings), from 0.75% previously. In contrast, the European Central Bank (ECB) left its deposit rate unchanged, reinforcing the perception of its lack of conventional policy room for manoeuvre.

The speed of these interest rate cuts, and the way that central banks have appeared to coordinate such cuts, underscores the urgency of policy makers trying to guard against a demand-shock to their economies. However, as significant as they are, these measures typically only act with a lag of between 18 and 24 months.

Central banks have instead been forced to be creative as markets face this latest challenge to the current economic cycle. With interest rate changes being ineffective at lower and absolute levels, there has been a move to unconventional policy tools.

Both the Fed and the BoE have restarted quantitative easing, with both indicating an unlimited capacity to act to buy their sovereign bonds. Meanwhile, the ECB has expanded its own QE programme.

The Fed has also joined other central banks in terms of the range of assets that it can now buy. As well as buying short-term corporate commercial paper debt, the Fed has now gone beyond what it did during the Global Financial Crisis of 2007-2008. The Fed now has the ability to buy Investment Grade corporate debt, for both existing and new issues, as well as Investment Grade Exchange Traded Funds (ETFs).

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MSCI ACWI countries & sectors: Q1 2020 total return (%) in Sterling terms

Monetary policy response shifts into gear

− Interest rates guard against a demand-shock but act with a lag of 18-24 months

− Central banks are forced to be creative. UK and US commit to open-ended quantitative easing (QE)

− US Fed goes further than during the Global Financial Crisis, and starts to buy US Investment Grade corporate debt

With interest rate changes being ineffective at lower and absolute levels, there has been a move to unconventional policy tools


The step by the Fed to buy corporate debt is arguably a positive game-changer for markets and was driven by the second exogenous threat to emerge in the quarter.

With the breakdown of the fragile Organization of Petroleum Exporting Countries, and other non-OPEC members, including Russia (OPEC+), production truce, Saudi Arabia and Russia declared an open war on supply. This has led to the threat of a huge positive oil supply response, and the oil price has collapsed - more than halving its starting point at the beginning of the year.

Markets are trying to estimate how long this oil supply dispute might last for. On one hand, Saudi Arabia can afford to produce at low oil prices. It’s recently privatised oil company, Aramco, has a marginal cost of production at just US$2.8 per barrel. But this is not the important number. For Saudi Arabia, the more important number is closer to US$80 per barrel. This is the price needed to balance the kingdom’s current fiscal spend, and a fiscal level which is roughly double that of Russia. This reliance on much higher oil prices arguably provides some motivation for Saudi Arabia to resolve their price war sooner rather than later. There is also hope that US political pressure on Saudi Arabia, not least given the context of the two allies’ military partnership, can also speed a resolution here.

In the longer term, a fall in the oil price driven by a supply-side response can be a positive for corporates and consumers in the same way as a tax cut. It can lead to a lower input cost for business margins and a boost for residual disposal income for individuals.

In the short term, however, the negative impacts for oil-producing companies and exporting countries dominate. During the quarter, we saw market stress within US high yield energy corporate debt, driven by US shale companies. With debt-funding modelled on much higher energy prices, despite the continued efficiencies in production, the risks of default for this sector has the potential to drive financial contagion across higher grades of corporate credit.

While the Fed has acted to support corporate credit, liquidity and credit quality risk remains. These risks were the reason that in early 2019, we reduced our exposure to this asset class, preferring equity risk over credit risk.

US corporate credit (yield to worst), Q1 2020 (%)

Source: Bloomberg. Data to 31 March 2020.

The make-up of Investment Grade (IG) indices globally have shifted dramatically around the last few years, resulting in over half the bonds in IG sitting in the ratings grade just above high yield (HY). The downgrade by rating agencies during the quarter of Kraft-Heinz and Renault to the high yield sector highlights this risk yet again.

Going forward, the market will remain sensitive to the risk of having to quickly absorb a high number of ‘fallen-angels’ (defined as those companies whose debt rating falls from IG to HY).

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A second exogenous threat shines a light on corporate credit risk

− Oil price war becomes the second exogenous threat in the quarter

− Long-term benefits of a lower oil price outweighed by risk to energy companies and high yield credit

− Markets hope for a near-term solution to OPEC+ production driven by Saudi Arabia’s fiscal needs

The step by the Fed to buy corporate debt is arguably a positive game-changer for markets


With economic growth under pressure, a consumer demand-shock is not the most immediate challenge for policy makers. Near term, the bigger risk is a supply shock as business is unable to function. With the time lag that monetary policy operates at, fiscal policy and immediate government spending is crucial. Fiscal subsidy support for both companies and consumers is the only bullet that can be fired to deliver a ‘right-now’ plan.

During March, it was the UK Chancellor Rishi Sunak who led the size of the response which followed in the US and Europe. However, for many countries including the UK, it took several attempts before the tipping point arrived. In the UK, first was the March Budget which, according to the Treasury, represents the highest levels of investment in real terms since 1955. Second was £330bn of guarantees of loans to businesses, some 15% of GDP.

However, neither planned longer-term investment spending nor loan guarantees were the fast-acting lifeline that markets were looking for. Giving a loan to a business that might be unable to pay it back doesn’t create a permanent solution for either the economy or markets. This was recognised by the UK’s third policy package, where the main focus was in delivering an 80% wage subsidy. It provides up to £2,500 per month for three months initially, for those workers furloughed and at risk of redundancy. The Institute for Fiscal Studies estimated that should 10% of workers claim this benefit for three months, this would cost the UK government £10bn. Based on this assumption, for a third of workers across six months, for example, an estimated cost might be around 3% of UK GDP.

In the US, the equivalent fiscal stimulus plans saw a rapid escalation in size, from $700bn initially to over $2trn, equal to around 10% of US GDP. While the scale of the stimulus was not the sticking point for lawmakers, the debate was around how the benefits would be shared between large corporations and smaller businesses. In any event, US policy makers went further than they had done during the Global Financial Crisis and authorised direct non-refundable money transfers to all American citizens up to $1,200 per person, echoing similar moves in Hong Kong earlier in the quarter. ‘Helicopter money’ had arrived.

Interest rates and inflation are very low in many developed economies. With this backdrop, governments and central banks can be less concerned about debt constraints when considering using money creation to fund expansionary fiscal policy. In more normal economic times, such policies would invite concern around the risks of inflationary pressures. In the short term, in the US at least it seems the immediate need to bolster confidence and demand has won the argument.

Markets listen for the sound of helicopters and a fiscal ‘right-now’ plan

− Fiscal policy action is the only bullet governments can fire for a ‘right-now’ plan

− Loans and credit help, but wage subsidies help provide a tipping point

− With direct transfers of money to citizens, ‘helicopter money’ arrives

With the time lag that monetary policy operates at, fiscal policy and immediate government spending is crucial


Markets continue to rely on policy makers for support. We saw this last year as the US-China trade tensions threatened global growth, and we are seeing it again this year. COVID-19 is expected to drive a temporary but nonetheless significant impact to economic activity.

Coordination between monetary and fiscal policy is key, but not all country and regional response mechanisms are born equal.

For some time, the eurozone has seen its policy makers effectively trying to drive their ‘economic car’ with one foot on the accelerator while keeping the other on the brake. Just as ECB presidents past (Mario Draghi) and present (Christine Lagarde) have pushed the limits of what the ECB is able to do monetarily, the fiscal response from member countries has been slow to come.

During the quarter, we have seen renewed calls by Lagarde on those eurozone economies which have the fiscal room to act, such as Germany. While German politicians were able to resist abandoning their balanced budget rules for last year’s climate change spending programme, COVID-19 has provided the tipping point.

A German stimulus of some €750bn, which includes new government borrowing supported by a supplementary budget of €156bn (the latter around 5% of German GDP) is significant. It is a step in the right direction, but it is still directed as a German solution for German business. With a debt-to-GDP ratio of close to 60%, it is a measure that Germany can easily afford. The same cannot be said for other eurozone member countries, with France and Spain closer to 100% and Italy at over 130% of debt-to-GDP. Structurally, it is difficult for eurozone policy markets to coordinate when they have to reconcile monetary union and fiscal sovereignty, though not impossible. What is required is a eurozone-wide response.

While eurozone countries grapple with the need to provide a region-wide release valve, there is a risk that the eurozone lags the pace and scale of stimulus internationally. For a region which is an export-led economy, where around half of German GDP is driven from exports, and as a taker of growth globally, we continue to hold an underweight equities position. There is a risk that when the economic recovery arrives, there might be other countries and regions which are better placed to take advantage into an inventory restocking upswing. While the valuation of eurozone equities compares favourably with other regions, the lower expected growth, coupled with the weaker coordination between policy makers, suggests that we maintain our cautious position for now.

In contrast, we have continued to maintain an overweight position in our Far East (Asia ex Japan) equity allocation. This is despite the COVID-19 impact to mainland China initially and subsequently to neighbouring Asian countries. Longer-term economic growth is still expected to continue to run above global peers, supported by relatively favourable demographics and a growing middle-class wealth creation.

In the short-term, we see relatively attractive valuations. This is supported by monetary and fiscal policy which is both coordinated and able to respond. The People’s Bank of China (PBOC) Governor, Yi Gang, has previously remarked that there is ‘tremendous room’ to adjust policy to support the domestic economy. Over the past year, Chinese policy makers have delivered a range of supportive policy measures. This has included tax cuts, interest rate cuts, reductions to banks’ reserve requirement ratios as well as supporting liquidity in interbank markets. This accommodation allows us to remain invested for the region’s longer-term economic growth attractions, rather than to be too focused on the shorter-term volatility, whether from the expectations around US-China trade negotiations or the current impact from COVID-19.

In looking through the current uncertainty around the next one or two quarters of economic growth, we also see a positive from the continuing rebalancing of China’s economy away from exports, which have fallen from over 35% of Chinese GDP in 2006 to below 20% in 2018, according to the World Bank. In addition, China is a net importer of oil, as are a number of neighbouring Asian countries, and longer term, should the current weakness in oil markets persist, this too will provide a tailwind to the region’s growth.

China exports (goods & services) as a share of GDP (%)

Source: Refinitiv, World Bank. Data to 2018.

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Minding the gap: not all country and regional responses are equal

− Markets continue to rely on policy makers to support risk-appetite

− Not all countries and regions have the same ability to coordinate policy action

− Eurozone and China show a marked contrast in their room for manoeuvre


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Markets are discounting a sharp reversal in earnings growth

Attempting to find a roadmap for the global economy against this backdrop is difficult. The International Monetary Fund (IMF) bookended the calendar quarter with its own downbeat assessment of the near-term outlook for global growth. The IMF sees negative growth and a global recession this year at least as bad as the Global Financial Crisis, but followed by a recovery in economic output in 2021. The Organisation for Economic Co-operation and Development (OECD) earlier in March had more optimistic numbers, which it now acknowledges are likely to be missed, but nonetheless it also predicted recovery in growth in 2021.

As epidemiologists will be quick to point out, what we do know about COVID-19, such as real-world transmission rates and mortality rates, is not known with much certainty. While the pace of daily new recorded cases in China have continued to moderate, markets have instead become unnerved by the rise and spread of cases in the rest of the world.

Markets are not perfectly efficient, but they try to incorporate the outlook for future economic activity discounted back to current prices of risk assets. Markets will be very focused on the success of governments to overcome COVID-19. The rate of change in new cases, for example, will be key to help determine if countries can follow an epidemiological or ‘epi’ curve similar to that experienced by China.

What is known is that the level of policy accommodation, whether it be low interest rates and QE or increased government spending, is likely to outlive that of the virus. The economic recovery upswing when it comes could be very pronounced, as businesses re-stock depleted inventories. Equally, consumers might likely overcompensate following to a period of forced social distancing and isolation. In the meantime, keeping these same consumers on the payroll through government-funded subsidies to employers will be key to support the recovery.

A V or a U? Looking for the roadmap for the global economy

− Three months on, there is still much we do not know about COVID-19

− Near-term estimates indicate significant economic impact, but policy responses will speed the recovery

− The economic upswing, when it comes, could be very pronounced

Markets have … become unnerved by the rise and spread of cases in the rest of the world


COVID-19 has rendered other political and geopolitical risks a distant second. Nonetheless, markets have been given a positive in the upcoming US Presidential elections later this year. Following the Democrat Party nomination race, the field has narrowed to only two candidates. Some way in the lead currently is Democrat centrist Joe Biden, the former Vice-President under Barack Obama.

With the rise of Biden at the expense of his opponent Bernie Sanders, the markets have clearly sought out a ‘safety-first’ candidate rather than risk upending politics with a radical departure to the left. For markets, the two likely choices of Biden vs Trump represent a good outcome compared with what was feared only a few months ago.

Joe Biden vs Bernie Sanders: race for Democrat Presidential nominee

Source: PredictIt.org. Data to 31 March 2020.

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Keeping an eye on US Presidential elections in November

− Democrat Presidential nomination race down to just two candidates

− COVID-19 drives a ‘safety-first’ swing from leftfield Sanders to centrist Biden

− Markets see a choice between Biden and Trump as a good outcome

Markets have clearly sought out a ‘safety-first’ candidate rather than risk upending politics with a radical departure to the left


As serious as the COVID-19 pandemic is for economies and markets, there is light at the end of tunnel. While estimates continue to range around the expected impact to global growth, the shape of the recovery (when it comes) gives some grounds for optimism. Monetary and fiscal stimulus cannot halt the spread of a pandemic, but they can speed the economic recovery afterwards. This will help to ensure that there is not a permanent diminution to global economic output.

This is an important differentiation to other economic shocks that investors have had to navigate, such as the US-China trade wars over the last two years. Here, had de-escalation efforts not been successful, there would have been a material and permanent reduction in trade and economic activity. This would have worked its way into corporate profitability and longer-term analyst expectations.

During the quarter, the sell-off in bond yields has accentuated the significant gap that currently stands between the earnings yield available on equities as compared to that on bonds. This earnings yield gap is a measure that we frequently reference in support of our structural asset allocation preference of equities over bonds. In the quarter, we saw record lows for both US 10 year and US 30 year government Treasury yields, for example. While these yields have pulled up from that floor, they are still substantially down since the start of the year.

At the same time, equities fell as much as 30% or more at times during the quarter. Notwithstanding the material reassessment in the outlook for corporate earnings over the next couple of quarters, equity valuations have clearly derated, and have pushed their earnings yield higher. Comparing equities and bonds, there is scope for the difference between the two to narrow, which would be a supportive backdrop for equities and risk assets in general.

While we would not expect this earnings yield differential to provide a floor for risk assets in the very near term, it will help markets to reassess risk appetite once the current levels of extreme market volatility subside. That said, both equities and bonds will continue to be important building blocks in the construction of investment portfolios. Mindful of the different risk-appetites of investors, the appropriate balance between the two will naturally vary.

There has been significant stimulus delivered in the quarter, with unprecedented government funded wage subsidies for workers, alongside commitments to unlimited monetary policy and even helicopter money. Alongside improving valuations in equity markets and our strong preference for equities over credit, in the quarter we sought to take a small step to increase risk. We have made a small reduction to our fixed income exposure, to add to our equity exposures, where we believe current market levels represent attractive entry points for longer-term investors.

While the path of the COVID-19 pandemic and the economic impacts remain far from certain, we will continue to monitor the reaction of financial markets globally. Our asset allocation will continue to be driven by the longer-term opportunities that short-term market movements may present.

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When markets sense a COVID-19 ‘floor’, should we seek equities, bonds or both?

− Sell-off in equities and falling government bond yields drive a wider earnings yield gap

− Significant stimulus gives grounds to expect support for longer-term investment horizons

− Taking advantage of market moves in the quarter to make a small increase to risk appetite

Our asset allocation will continue to be driven by the longer-term opportunities that short-term market movements may present


Important information

The performance indicated for each sector should not be taken as an expectation of the future performance. Investors should be aware that the price of investments and the income from them can go down as well as up and that neither is guaranteed. Past performance is not a reliable indicator of future results. Investors may not get back the amount invested. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. Investors should be aware of the additional risks associated with funds investing in emerging or developing markets.

The information in this document does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it. This document is for the information of the recipient only and should not be reproduced, copied or made available to others.

Brooks Macdonald is a trading name of Brooks Macdonald Group plc used by various companies in the Brooks Macdonald group of companies. Brooks Macdonald Asset Management Limited is regulated by the Financial Conduct Authority. Registered in England No 3417519. Registered office: 21 Lombard Street, EC3V 9AH. Brooks Macdonald Funds Limited is authorised and regulated by the Financial Conduct Authority. Registered in England No. 5730097. Registered office: 21 Lombard Street, EC3V 9AH. Brooks Macdonald Asset Management (International) Limited is licensed and regulated by the Guernsey Financial Services Commission. Its Jersey Branch is licensed and regulated by the Jersey Financial Services Commission. Brooks Macdonald Asset Management (International) Limited is an authorised Financial Services Provider, regulated by the South African Financial Sector Conduct Authority. Registered in Guernsey No 47575. Registered office: First Floor, Royal Chambers, St. Julian’s Avenue, St. Peter Port, Guernsey GY1 2HH. This document contains data attributed to a third party which is the property of that third party and is licensed for use by Brooks Macdonald, subject to the below terms of use.

MSCI INDICES

The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

More information about the Brooks Macdonald Group can be found at www.brooksmacdonald.com.

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