Q3 2023

The third quarter saw consensus expectations of an imminent US recession push back further out to 2024 in the face of resilient economic growth. Despite this, global equity markets were volatile, beginning the quarter strongly before turning negative in August and September as belief that central banks would keep rates higher for longer weighed on markets as core inflation remained above the 2% target level.

We remain cautious over the outlook for economic growth; and, with it, markets. This is primarily driven by the direction of interest rates and the (lagged) effect it has on corporates, consumers and governments. All have to refinance their debt, which was written at historic low interest rates, at higher though simply more normalised levels. We cannot see interest rates being cut significantly outside of a major economic downturn. This interest rate cycle has seen much quicker rate increases than in prior cycles and the impact of the higher rates may be more severe, with the impact delayed all the more so by excess savings built up during Covid.

Performance was positive in Q3. All sub-strategies bar certain equity long/short managers saw gains. We remain positive on the outlook for our strategies and their ability to generate high single-digit returns with minimal beta to either equity or bond markets.