Whilst strong performance was generated across all regions, two in particular stood out: the Japan equity asset class outperformed the benchmark by 15.2% whilst the Emerging Markets equity assets also outperformed by 15.1%, (both in Sterling terms). Within the Global Emerging Markets portfolio, almost half the outperformance was due to Chinese stock selection where technology and healthcare were the dominant success stories.
In Japan, Technology and Industrials stocks drove the outperformance. The fund also benefitted from opportunities after the March 2020 lows to purchase quality stocks at attractive valuations that were previously considered too expensive.
US equities returned 29.3% for the year against the benchmark return of 25.9% with Technology stocks a dominant success story during 2020. Profits in several stocks were taken to allow investment in assets that subsequently benefitted from the buoyant vaccine news. These changes were designed to take advantage of the reflation/recovery stage now being entered.
The European equity portfolio delivered strong outperformance against its benchmark (the assets returned 11.4% whereas the benchmark returned 10.3%) during the year. Stock selection accounted for all the outperformance led by Technology and Industrials.
UK equity assets (-9.7%) just outperformed the FTSE All Share (-9.8%) over the year helped by stock selection within Industrials. Overall, the UK equity market lagged behind all major equity markets during 2020. Fears of a no-deal Brexit hampered the market throughout the year. The market also suffered for its relatively high exposure to energy-related stocks.
The UK corporate-bond portfolio returned 10.2% for the year, outperforming its benchmark, which returned 8.6%. The good performance came from the majority holding in medium and long-dated bonds, which outperformed short-dated bonds during 2020. Stock selection was the main driver for the funds outperformance.