April 2025

Performance

The return for April 2025 was impacted by the market uncertainty caused by the imposition of tariffs by the Trump Administration. The Fund was down 17 bp for the month which was a relatively good result given credit spreads widened considerably over the month. Overall, the Fund rolling annual return is 5.50%.

Market Insights

Markets have settled somewhat and are poised for trade deals. Trump imposed a 90- day moratorium before he would impose rates. Tariffs even at the base level of 10% will have an adverse impact on inflation. What happens next will be who signs a trade deal and the next level of tariffs. Until there is more certainty markets will be volatile and nervous. Various central banks including the Federal Reserve have been pointed in their assessment and are unwilling to lower interest rates for example because the Trump agenda is largely unknown at this stage.

Key Contributors & Detractors

During April credit spreads reacted violently at first before settling. Bank senior unsecured widened up to 20bp depending upon tenor whilst corporate paper widened between 25 and 50 bp depending upon tenor and structure. The market for much of the month was open but barely. Wide spreads were the norm and as such trading opportunities were very limited. As the month wore on liquidity returned and spreads tightened.

Outlook & Strategy

Markets to remain nervous until we see more clarity on trade and data relating to the impact of tariffs. This uncertainty looks likely to prevail for some months as we do not know the immediate impact on inflation. Importantly the trade between U.S. and China is vulnerable. Both countries have imposed tariffs that are very high making it difficult to for each to sell goods in the other country.

The situation is not assisted as the Trump Agenda is still lacking clarity. A number of recent company quarterly updates have also raised this uncertainty and said they are not able to provide guidance for the coming quarters.

The portfolio will look to invest in securities that represent value. The portfolio’s average credit rating is slowly being moved back towards an average of single A. Liquidity is also improving. A barbell approach is being used to capture some higher spread securities whilst the weighting in bank senior unsecured is also increasing.