Fund commentary

Aviva Investors Sterling Government Liquidity Fund

Month in review for April 2024

Richard Hallett

Fund Manager

Summary

Month in review

It was a volatile month for sterling money markets with yield curves flattening across many tenors of the market. The fund’s weighted average maturity fell to 23 days as valuations for T-Bills have dipped in relation to repo.

Looking ahead

The outlook for money market investments has improved. The UK consumer picture has stabilised alongside that of inflation. Inward flows of assets have also helped from a technical perspective.

Key facts

Fund managers
Richard Hallett since 12/2008,
Josh Bramwell since 12/2021
Share class inception date
15/09/2020
Fund size (as at 31/05/2024)
GBP 5484.3m
Benchmark
SONIA LENDING RATE GBP

Fund overview

Objective: The investment objective of the Fund is to offer returns in line with money market rates and to preserve the value of the investment. The performance of the Sub-fund is measured against the Sterling Overnight Index Average (SONIA) Rate (the benchmark). The Aviva Investors Sterling Government Liquidity Fund is a Short-Term Low-Volatility Net Asset Value (LVNAV) Money Market Fund.

Month in review

It was a volatile month for sterling money markets with yield curves flattening across many tenors of the market. April saw a sharp increase in sovereign bond yield volatility as expectations for interest rate cuts in the US were pushed out once again amid strong employment data. The probability of a summer cut weakened considerably, with some forecasters even starting to doubt that 2024 would see any cuts at all from the US Federal Reserve. In the UK, however, positive comments from Bank of England (BoE) governor Andrew Bailey regarding the path of UK inflation saw the market bet on the first rate cut arriving in August (UK CPI fell to 3.2% from 3.4% the previous month). There were nevertheless dissenters in the ranks of the monetary policy committee who cautioned against policy being loosened too soon. Regarding the economy, there was a slight setback for the manufacturing sector as Red Sea shipment delays weighed on output.
In the fund, the weighted average maturity (WAM) fell to 23 days from 27 days the previous month as valuations for T-Bills have dipped in relation to repo. However, we are looking to increase exposure when we see better value. The fund’s yield was in line with its competitors.

 

 

 

 

 

 

 

 

 

Performance

For the latest Monthly, Cumulative, and Annualised Fund performance data please refer to the PDF factsheet below.

SONIA LENDING RATE GBP

Looking ahead Last updated 30 April 2024

With evidence building that tighter policy has held back economic activity and loosened the labour market, the likelihood of the BoE starting to cut interest rates at some point in the summer has strengthened. While input costs and wage pressures remain higher than desired, it appears most of the UK policymakers, with two notable exceptions, feel the projected path of inflation is in line with bringing it back to target. The question that money market investors will now be asking is how rapid the policy loosening cycle will be. That is likely to hang largely on how inflation and growth data develop from here.
Overall, the outlook for money market investments has improved. The UK consumer picture has stabilised alongside that of inflation. April’s events aside, gilt market volatility has settled down, thereby improving valuation metrics. Inward flows of assets into the money market have also helped from a technical perspective.
Hanging over the outlook is political uncertainty as the UK approaches a general election and a likely change of government. Geopolitical risks also remain elevated as the crisis in the Middle East and the conflict in Ukraine continue.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Risks

Full information on risks applicable to the Fund are in the Prospectus and the Key Investor Information Document (KIID).

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Important information

THIS IS A MARKETING COMMUNICATION

The source for all performance, portfolio and fund breakdown data is Morningstar unless indicated otherwise. For share classes that have not yet completed 5 years, the cumulative performance chart will start from the first full month. All data is as at the date of the Factsheet, unless indicated otherwise.

Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as personalised advice of any nature. This document should not be taken as a recommendation or offer by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Portfolio holdings are subject to change at any time without notice and information about specific securities should not be construed as a recommendation to buy or sell any securities.

For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies in English can be obtained, free of charge from Aviva Investors Luxembourg S.A., 2 rue du Fort Bourbon, L-1249 Luxembourg or from J.P. Morgan Administration Services (Ireland) Limited. You can also download copies at www.avivainvestors.com

Where relevant, information on our approach to the sustainability aspects of the fund and the Sustainable Finance disclosure regulation (SFDR) including policies and procedures can be found on the following link: https://www.avivainvestors.com/en-gb/capabilities/sustainable-finance-disclosure-regulation/

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