The COVID-19 coronavirus continued to hammer financial markets in March as the virus spread to the US and across the globe. The economic carnage produced by the abrupt shutdown of economic activity across the world is evident from the weekly unemployment claims in the US. In the period prior to the outbreak, jobless claims had declined to their lowest levels in sixty years. In the second week of March claims increased suddenly to 282,000 and then sky rocketed to a record 3.3 million during the week ended March 21. As bad as these figures are, the numbers are likely to climb even higher next week.
This hibernation of the world’s economy was reflected in the major world stock markets as represented by the MSCI World Index and the S&P 500 which continued to fall, with both indices dropping in February by 13.5% and 12.5% respectively. The UK, European and Asian markets reacted in similar fashion. In the UK, the FTSE 100 was down by 13.8% in local currency terms while the indices associated with smaller companies fared much worse. The Small Cap Index declined by 20.8%, the AIM All Share Index was down by 21.7% and the Fledgling Index was down by 25.3%.
While our portfolio of investments declined in similar fashion to that of the overall market, it performed better than the small to midcap segment of the market, declining by 18.8% during the month which, after allowing for the expenses resulted in a decline of 22.6% in the NAV. When analysing the underlying performance of the portfolio it is interesting to note that the non-REIT component of the portfolio declined by only 14% with overall performance dragged down by the REIT exposure. It would appear that the REIT’s have been under additional price pressure due to the selling by open-ended property funds. These funds have used exposures to listed REITs, rather than extra cash, to provide liquidity for excessive redemptions so as to retain an exposure to property. This is evidenced by a recent RNS announcement by Tritax BigBox (BBOX) where Aviva (a closed open-ended property fund) announced that it had reduced its holding.
We sold our holdings in Biffa, VP and Marston’s, utilising the proceeds and some of our surplus cash to add to our position in Costain, Jarvis, Boohoo, Rightmove, JD Sports and T Clark. Cash currently comprises 7.9% of the portfolio.