Despite a series of short spikes in market level volatility this month, most regions continued to exhibit low volatility characteristics, according to our market environment analysis. By contrast, North America once again exhibited a more elevated volatility state, retracing to medium levels of volatility in recent weeks. In addition, North America also demonstrated more neutral sentiment over the course of June, moving from its previous optimistic anchor. This familiar pattern has persisted in recent months, with the remaining regions exhibiting optimistic sentiment. As mentioned above, the impact of divergent monetary regimes between the US and other countries accounted for much of the dispersion in volatility states, with the latest US rate hike underscoring the Federal Reserve's commitment to normalisation.

The pronounced style and sector rotations experienced in the wider market this month served as a further reminder that enhanced accommodation from central banks continues to camouflage the true extent of volatility in the system. While exhibiting low conventional realised and implied volatility, markets continued to demonstrate rotational behaviours at a style, sector and factor level. Investor risk aversion appears to have abated across all regions following the pronounced deterioration in risk appetite from January through to May. Different risk profiles persist across the investment universe. Investors' tolerance of risk remained most elevated within Asia Pacific, at marginally above two-thirds risk on, representing a marked improvement in risk appetite from the previous month. All the remaining regions have broadly registered fifty-fifty risk on profiles, with Europe demonstrating the least pronounced risk-off state. Risk appetite in both North America and Japan is broadly in line.

Performance amongst the fund's stock selection components was mixed in June. The Market Dynamics component detracted from performance, caused predominantly by our deployment of stock and industry level momentum within the portfolio. By contrast the Analyst Sentiment component was a positive contributor during this month, driven by the price arbitrage characteristic. A further positive contributor was the Company Management criterion, which focuses on the historic decisions of management teams over time.

Market environment positioning within Asia ex Japan, Japan and Europe once again remained anchored in a low volatility state during March. North America, in contrast to the other regions, had seemed to buck this trend by exhibiting a more elevated volatility state; although it continues to demonstrate greater volatility than the other regions, it too has moved back to a low volatility state during the past month. Uncertainty around the future policy direction of the new administration in Washington, together with the impact of divergent monetary policy between the US and the other regions, accounts for this differentiation in volatility states. Ongoing expansive monetary policies deployed by central bank authorities in the three remaining regions continued to support their ''artificially'' low volatility state.
Levels of investor risk appetite retraced markedly across all regions this month, corresponding with a sharp rotation away from pro-value stocks generally. Investors’ tolerance of risk remains most elevated within Asia ex Japan, at broadly three-quarters risk on. Risk appetite in North America and Japan has come off the most during this time: both regions are now broadly two-thirds risk on. Europe remains in a slightly higher state of risk tolerance, but below Asia ex Japan.

Performance amongst the fund’s stock selection components was broadly positive in March. The analyst sentiment component was amongst the strongest contributors to performance this month; in particular the price arbitrage technique proved effective in identifying companies whose share price had not always fully priced in the most recent and salient available corporate information. Our blended allocation between cheaper stocks and corporates boasting robust balance sheets generated positive returns and significantly mitigated the potential losses which might have been sustained during such a sell-off.