Ark Review of the Month
The second quarter of 2021 saw a rebound in long-suppressed consumer spending. Economic data was strong in general, especially in the US. The S&P 500, which increased 8.5%, was again one of the top risers in the second quarter, with European equities following closely behind. The MSCI Europe ex-UK Index increased 7.1% and the UK FTSE All-Share increased 5.6% over the quarter.
As for fixed income markets, credit spreads has declined slightly. UK Gilts and US Treasuries have outperformed other sovereign bonds, with prices increased by 1.8% and 1.7% respectively. Prices of global investment-grade corporate bonds increased by 2.7%.
Government bonds yield as of 30 June:
UK Gilt 10 Year @0.72%
US Treasury 10 Year @1.45%
German Bund 10 Year @-0.20%
The UK's economic recovery continued to exceed expectations as restrictions eased in May and June. Growth was particularly strong in the service sector, such as retail, hospitality and hairdressing. GDP grew by 2.3% in April 2021, which is the third consecutive month of growth in GDP.
Inflation continued to rise as demand for goods and services rose. The Consumer Price Index (CPI) increased by 2.1% in May, reaching its highest since July 2019. The CPI is now above the Bank of England's target of 2%. At the Bank's June policy meeting, the Monetary Policy Committee said inflation could exceed 3% in the near term, but the rise would be temporary and is likely to return to 2% in the medium term. The Bank said it would not tighten its monetary policy as a result but would continue to monitor the situation closely.
Last week, rating agency Fitch updated its credit rating on one of Ark's holdings, logistics real estate group SEGRO plc. SEGRO's long-term issuer default rating was raised from 'BBB+' to 'A-' with a stable outlook and its senior unsecured rating was raised from 'A-' to 'A'.
Amid the pandemic, SEGRO's portfolio of warehouses and big-box assets is geographically diverse and has generated a steady return. The rating agency expects increased e-commerce penetration to be a structural trend and demand from corporate customers for well-located logistic space will continue to rise. SEGRO's annual report shows that its property portfolio has high rent collection rates, low vacancy, long remaining leases and a diversified tenant base, all of which add to the visibility and stability of future rental income.
Some of Ark's other investments, such as infrastructure investment trust Sequoia Economic, are also set to benefit from the boom in the warehouse logistics sector for some time to come.
As always, our Investor Relations team would be more than happy to help you with any queries. You could also follow our Twitter @WealthArk to receive products and services updates each week.
The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guarantees and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities, or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.
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