April saw sharp divergences in the performance of asset classes, with weakness from a variety of markets, such as government bonds and Asian equities, and strength from markets as diverse as commodities, high yield and Japanese equities.

The rally across commodity markets, which began in March, continued in April and Brent Crude rose an impressive 14% in the month. This helped certain oil exporting countries, such as Brazil (+8.6%) and Russia (+5.4%), post strong gains.

Other risk assets, such as high yield and emerging market debt, also delivered positive returns for investors in the month, albeit at much lower levels. The average fund in the IA High Yield sector rose 2.2%, while the JPM GBI-EM Global Diversified index, which tracks the performance of local currency emerging market debt, ended the month up 65bps.

Japan was one of the few stock markets to deliver positive returns in April. The Topix rose 2.6% in the month although this was due to the strength of the Japanese Yen. In local currency terms the market fell 49bps. Indeed, currency was a key driver of performance in April and Japan was an exception to the norm, with sterling strength typical across most overseas markets.

The uncertainty surrounding the upcoming Brexit referendum had been a key factor in the sharp decline in sterling in the second half of 2015 and start of 2016. Since then polls have showed a lead for the Remain campaign and key political figures, such as US President Barack Obama, have come out in favour of rejecting Brexit.

As a result, falls reversed in March and the pound strength continued in April. For example, the 1.7% rise in sterling relative to the US dollar over the month offset all the gains registered by US equities, and the market posted a 1.5% fall in sterling terms.

There were also falls across many other key asset classes, such as global government bonds, driven by the strong pound noted earlier and a general rise in yields, and Asian equities, led by sharp falls in Chinese equities.

While market volatility shows no signs of abating, we continue to try to look past short-term market noise and focus on areas where we can identify value. For example, we have been trying to harvest the superior yields from emerging market debt securities that offer good value relative to the risk they carry.

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