GLOBAL EQUITIES FUND LU0273960111

The investment objective of the Sub-Fund is to invest its assets primarily in equity securities and other equivalent securities of companies admitted to an Official Listing or dealt in, on a Regulated Market in developed countries of Europe, USA and Asia.

Global equities in the developed world were off to a rocky start during the first quarter of the year. Indeed, most developed equity markets ended the quarter with losses as the outbreak of the Iran war resulted in a huge spike in the price of oil, which in turn weighed on equity markets. In the US, the equity market registered significant volatility during the first quarter of the year. The year had started on a positive note, as the US economy remained resilient while inflationary pressures appeared to be easing. The positive sentiment in the US market was upended when US and Israeli air forces launched an attack on Iran, sending the price of oil up significantly as the Strait of Hormuz, an essential waterway through which approximately 20% of global oil supplies pass, was essentially shut down. Energy stocks were the exception where integrated producers, refiners and energy infrastructure companies all benefitted from higher oil prices. Apart from geopolitical concerns, the information technology sector was weak in certain segments. Software companies were hit especially hard as expectations mounted that AI would upend their business model rendering software companies if not outright obsolete then at least much diminished. In Europe, equity markets also declined substantially in March following the outbreak of hostilities towards Iran. The Consumer Discretionary sector was hit particularly hard. Software companies within the Information Technology sector also declined in Europe along the same concerns that plagued the US software industry. Lastly, in Japan the equity market was an outlier during the first quarter of the year realizing positive returns. More specifically, the equity market realized substantial gains in February following the decisive win for the LDP in the House of Representatives election. This victory increased expectations for political stability and further market-friendly policies. Nevertheless, Japanese equities also registered significant losses in March due to the geopolitical concerns.

The Funds were fully invested during the first month of the new year before moving to a more neutral to relatively cautious stance over the next two months of the first quarter, as the Iran war broke out. Developed Equity Markets ended the first quarter of the year with losses, as the huge spike in the price of oil stemming from the outbreak of war, between the US and Israel on the one side and Iran on the other side, weighed on equity markets. The only exception was the Japanese equity market which realized gains. It should be noted, though, that the Japanese equity market had realized substantial gains before the outbreak of the Iran war that were not completely erased when the war broke out. More specifically, the Funds maintained a basically fully invested level of investment in the US. The Funds were invested across sectors in the US. Nevertheless, it should be noted that the Funds maintained a relatively cautious stance on the Information Technology sector. The Funds had significantly reduced their exposure to the software segment specifically, which benefitted the Funds’ performance. Moreover, the Funds were cautious on the Mag 7 stocks for the better part of the first quarter before moving to a more neutral stance following the correction in their share prices. Further, the Funds had increased their exposure to the Energy sector in the US before the outbreak of the war, which benefited the Funds’ performance as the price of oil spiked. The Funds had also substantially increased their exposure to the Defense Industry. Lastly, the Funds shifted to a more neutral stance on the Financials sector. In Europe, the Funds were optimistic on European equity markets at the beginning of the year but quickly moved to a more neutral position at the outbreak of the Iran war before moving to an even more cautious stance towards the end of the quarter. Europe overall is more vulnerable to a potential energy shock. The Funds quickly moved to a more neutral stance on the European Financials sector. The Funds also initiated certain positions in the European defense industry. Further, the Fund increased exposure to the Healthcare sector, mainly via a specific Pharma name. Lastly, the Funds also increased their exposure to the Utilities sector. Lastly, in Japan the Funds maintained a relatively neutral stance for the most part during the first quarter before reducing exposure somewhat towards the end of the quarter. Japan is also vulnerable to a potential energy shock but returns in the stock market were boosted after a decisive win for the LDP in the House of Representatives election. This win increased expectations for political stability and further market friendly policies. As aforementioned, the Japanese stock market also declined as the price of oil spiked but the losses were not enough to completely offset the realized gains earlier in the quarter.