Skip to Content
Stanley

Market and Fund Performance Commentary.

October 2021.

This site is for UK investment professionals only. If you're not an investment professional, please find out more about us at vitality.co.uk.

Market Commentary.

Market Overview, October 2021.

From SEI’s investment management team.

Equity markets charged ahead around most of the world in October, erasing September’s dip. Developed-market equity had a large gain, led by the US, while emerging-market mounted a subdued advance. European and UK equity delivered strong performance in October, while Japan continued its countertrend pattern with a significant loss (offsetting its sizeable September gain). In emerging markets, China offset recent losses with a healthy showing in October. Brazil and Chile had the worst country-level performance for the month, weighing heavily on overall Latin American equity-market performance.

Government bond yield curves flattened in the UK, Eurozone and US during October as short-to-medium term rates climbed and longer-term rates declined. Inflation-indexed sovereign debt was the top-performing segment of fixed-interest markets in October, retaining its lead from the third quarter, while local-currency emerging-market debt continued to have the deepest losses.

The price of oil increased significantly in October, reaching its highest level since October 2014.

New global COVID-19 infections appeared to bottom in mid-October (as measured by the seven-day average) after hitting a recent peak in mid-August. Eastern Europe, and to a lesser degree the Caribbean and Southeast Asia, had the highest concentrations of countries contending with all-time peak or near-peak outbreaks at month end.

Source: Vitality and SEI, October 2021

Fund Performance Commentary. 

VitalityInvest risk-profiled solutions.

VitalityInvest Risk Optimiser (VIRO) and EnVIRO funds.

From VitalityInvest’s investment team. The VIRO and EnVIRO range adopt a similar asset allocation.

The VIRO fund range returned between 1.1% (VIRO 3) and 1.7% (VIRO 5) whilst the EnVIRO fund range returned between 1.5% (ESG Risk Optimiser 3) and 2.5% (ESG Risk Optimiser 5) in October.

Developed global equity markets resumed their upward trend in October, and The equity allocation of the funds was the major contributor to performance for both the VIRO and EnVIRO fund ranges.

In particular, US and European ex-UK equity led October rebound, and UK equity was a key contributor across the fund ranges. Japanese equity detracted slightly, whilst gains from the rest of Asia Pacific equity markets aided the performance of the funds in risk profiles 5 to 7. The appreciation of Sterling versus other hard currencies (primarily the US Dollar and Euro) partly reduced the gains from overseas equity, which is expressed in Sterling within the funds. This affected the contribution from emerging market equity, which despite being positive in local currency, it ended negative when converted to Sterling, and marginally detracted from the performance of the higher risk profiled funds (risk profiles 6 and 7).

From a fixed income allocation perspective, the flattening of the yield curve of developed market yields and the exposure to UK Government bonds helped the performance of the lower risk profiled funds (risk profiles 3 to 5). The exposure to inflation-linked UK Government bonds further strengthened the contribution from fixed income assets. Corporate bonds retreated globally, although this was only a marginal headwind for the funds.

ESG considerations for the EnVIRO range
From an ESG perspective, the EnVIRO fund range benefitted from the outperformance of some of the underling ESG optimised exposure against traditional indices. The strong performance of sectors such as technology, financials and health care were of support in the US, Europe and UK equity ESG exposure of the funds. Renewable energy stocks also outperformed.

Source: Vitality, October 2021

VitalityInvest risk-profiled solutions.

VitalityInvest Global Multi-Manager funds.

From SEI's investment management team.

The VitalityInvest Global Multi-Manager funds returned between 0.4% (Global Multi-Manager 3) and 2.0% (Global Multi-Manager 7) in October.

Their equity exposure of the funds, in aggregate, delivered positive returns across the range. The strong diversification headwinds, as market leadership was concentrated in a handful of mega-cap stocks, did not favour the more diverse construction of the funds in October.

Defensive, lower volatility stocks, which form an important component of the lower risk Global Multi-Manager funds, delivered positive, albeit small, returns over the month, in keeping with its core exposures to utilities, consumer staples and telecoms.

Returns from quality strategies were muted, while momentum strategies outperformed, thanks to the strong gains in consumer discretionary stocks that are viewed as beneficiaries of higher prices, particularly luxury goods and auto manufacturers. Value stocks lagged in October. While exposure to energy and financials, which gained from rising inflation expectations, benefitted the style, this was more than offset by exposure to cheaper telecommunication services and semiconductor manufacturers.

The fixed income strategies employed in the Global Multi-Manager funds delivered returns broadly in line with their respective markets over the month.

Finally, the funds’ tactical asset allocation positions, which reflect the expectations for a reflationary environment, were beneficial over the month. Exposure to broad commodities and US inflation expectations were notable contributors.

Source: SEI and Vitality, October 2021

Performer Funds.

Outcome-based multi-asset funds. 

From Ninety One’s Multi-Asset and Quality teams.

The VitalityInvest Ninety One Multi-Asset Income fund detracted 0.2% in October. The fund’s focus on more resilient assets meant that the fund was defensively positioned and it didn’t capture the positive trend in global assets.

The VitalityInvest Ninety One Dynamic Multi-Asset fund detracted 0.4% in October. The funds’ flexible investment philosophy means that the fund is defensively positioned to reflect a more cautious economic outlook and reduce the overall risk of the fund.

Source: Ninety One and Vitality, October 2021

Performer Funds.

Single-asset class: Global and UK Listed Equity funds.

From Ninety One’s Multi-Asset and Quality teams.

The VitalityInvest Ninety One Global Equity Growth and Income funds returned 2.0% and 1.2% respectively in October. The VitalityInvest Ninety One UK Listed Equity Growth fund returned 0.1% and the UK Listed Equity Income fund detracted 0.6%.

In the Global Equity funds, the allocation to health care and technology sectors helped the performance of the Growth fund, whilst the Income fund benefitted from the allocation to cyclical and technology stocks.

The underexposure to health care and financial sectors in the UK Equity funds meant that the strategies did not participate to the gains from the region. The funds remain well positioned to mitigate downside risk in the current uncertain environment.

Source: Ninety One and Vitality, October 2021

Important information.

VitalityInvest is a trading name of Vitality Corporate Services Limited. Vitality Corporate Services Limited is authorised and regulated by the Financial Conduct Authority.

Past performance should not be taken as a guide to the future performance and there is no guarantee that an investment will make profits: losses may be made.

VitalityInvest makes every effort to ensure that the information provided in this commentary is accurate and complete but no guarantee or warranty is given. This commentary is for general information purposes only and is not to be relied upon in making an investment or any other decision. Nothing in this commentary constitutes investment, legal or any other advice. This commentary is for investment professionals only and any retail customers should speak to an authorised financial adviser before making any investment decision.