Global equity markets experienced considerable volatility during the first quarter. Concerns about the growth of the global economy drove sharp falls in the first half of the quarter. A strong recovery then followed after supportive moves by central banks and firmer oil prices boosted sentiment. Emerging markets and riskier assets generally outperformed in this more positive environment.

It was a very volatile start to the year for global equity markets. By mid-February they had fallen sharply due to concerns about the strength of the global economy. As has often been the case recently when investors take fright, policymakers marched to the rescue. Dovish moves by the central banks underscored a big rebound in commodity prices. Firmer oil prices, which appear to have become the key barometer of investors' risk tolerance, played a significant role in boosting sentiment. Developed markets rallied strongly over the remainder of the quarter, but it was the new found strength in emerging markets and riskier assets more generally that further reinforced the recovery. Emerging markets ended the quarter around 6% ahead of developed equities.

The first quarter bore the hallmarks of a period of market rotation, as the extremes of the last few years receded and tentative signs of a recovery in Value as an investment style emerged. Since the mid-February low, market performance has been broadening out from the narrow cohort of winners that dominated last year and has been led by previous laggards. These are reasons to believe that the momentum-driven market that has been a headwind to our performance in recent years is at least abating and perhaps even reversing.

The fund outperformed significantly over the first quarter. Notable positives came from stock selection within consumer discretionary, technology and industrials, particularly in the US. Our long-held preference for high quality US industrials, in particular machinery, paid off. Our preference for 'mature' technology stocks in the US, such as IBM, also continued. Avoiding some of the expensive growth names in the US, several of which suffered earnings disappointments, also helped relative performance. Stock selection in Japan was positive for the fund, particularly in the areas of telecoms and technology.

Source: Schroder ISF QEP Global Core Investment Report - Q1 2016