With risk-on sentiment still firmly intact, growth assets continued to drive portfolio returns in the second quarter of 2021.

Equities and property, in particular, delivered strong returns once again. This is despite lingering concerns about inflation and the outlook for interest rates.

In both the US and South Africa, inflation readings came in higher than expected. However, the Federal Reserve indicated that rate hikes would likely not be needed until 2023.

The Covid-19 pandemic remained on investors’ radars – case numbers in South Africa and globally roughly doubled in the first half of 2021 as the Delta variant circulated. Developed markets continued to make steady progress with their vaccination programmes, although many emerging markets were much further behind.

Nevertheless, with the end of the pandemic in sight, and with rates expected to remain low for some time, growth assets powered ahead. Most large equity markets continued to hit fresh all-time highs, and optimism boosted emerging markets as well.

South African equities – which have outperformed all other major markets over the past year – continued their solid streak in the second quarter, as did the rand, which strengthened by 3.4%.

Against this backdrop, the high-equity CoreShares Wealth Accumulation fund delivered returns of 3.08% in the second quarter, and 10.14% in the year to date.

The more conservative low-equity CoreShares Stable Income fund returned 2.8% in the quarter and 7% in the year to date.

Both funds outperformed their peer-group averages. Their performance was driven by local and offshore equities and property, although the rand’s advances muted the returns from other markets.

Join Chris Rule, Head of Product & Client Solutions at CoreShares Asset Management, as we discuss the events of Q2 2021 and unpack the performance of the CoreShares Wealth Accumulation and the CoreShares Stable Income funds.

“Notwithstanding some of the inflation risks in the system, markets continue to rally. Most significant equity markets continue to hit all-time highs,” Rule says. “The optimism has translated into a real risk-on environment, with emerging market currencies and equity markets benefiting from capital flows.”

“South African equities have been the place to be over the past year, leading the way despite fairly muted returns in the past quarter.”

Rule also touches on the importance of matching your investment strategy and appetite for risk with your time horizon.

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