April was a difficult month for investors since both equities and bonds lost ground, as has been the case since the beginning of the year. The mix of sharply rising interest rates, renewed lockdowns in China and geopolitical uncertainties was too much for the previously very robust equity markets: the lows since the outbreak of the war have been levelled out. We had anticipated this movement with our equity underweight. However, we underestimated the Chinese government's stubbornness with its insistence on its zero-COVID policy. The focus on emerging markets therefore did not pay off.
We are maintaining our small exposure to Chinese technology stocks, but exposure to emerging market equities as a whole is being reduced. We are also selling our position in global small caps, as these companies are suffering from margin pressure and are not building any momentum. Yields on bonds have finally returned to a more attractive level.