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Market performance

Market performance over the year to 31 March 2023 for each asset class that NILGOSC is invested in, is set out below.

Global equities generated positive returns over the twelve months to 31 March 2022. Equities delivered solid returns in 2021, boosted by optimism over Covid-19 vaccine roll-outs, supportive monetary and fiscal policies, and improving economic data. However, markets reversed some of their gains in Q1 2022 as geopolitical risk took centre stage with Russia invading Ukraine. Furthermore, major central banks continued to move forward with normalising monetary policy as inflation rates worldwide rose rapidly.

The Russian invasion of Ukraine created significant market volatility and economic uncertainty over Q1 2022. G7 sanctions against Russia are likely to slow Gross Domestic Product (GDP) growth for the remainder of 2022 and cause further supply chain disruption. While the United States (US) has banned Russian oil and gas imports, the picture in Europe is more complicated given its Russian oil and gas dependence.

Sterling ended the period 1.1% lower on a trade weighted basis. In Q4 2021, the Bank of England (BoE) raised its benchmark interest rate by 0.15% to 0.25% to combat inflation. In Q1 2022, the BoE increased its benchmark interest by another 0.5% to 0.75%. The expectation of higher interest rates and diminishing Brexit fears had improved sentiment over much of 2021, but the outbreak of war in Ukraine led to significant flows towards the US dollar.

Brent crude oil prices rose by 69.8% to $108 per barrel over the twelve months. Economic recovery and a cutback in production over the pandemic supported oil prices. In Q3 2021, the Organization of the Petroleum Exporting Countries Plus (OPEC+) reached an agreement to increase crude oil production by 400,000 barrels a day from August until the end of 2022, although this pace disappointed expectations. In the fourth quarter of 2021, the momentum in oil prices dropped as Omicron and resurgent Covid-19 fears surfaced. However, crude oil prices rose sharply during the first quarter of 2022 as geopolitical tensions due to the Russia Ukraine war further exacerbated supply fears.

The graph below summarises the index returns on the main asset classes/regions for the year to 31 March 2022. Returns are shown in sterling terms and local currency terms.

Graph visually representing the index returns from 31/03/2021 to 31/03/2022
Source: FactSet, MSCI

Further details on the performance of specific asset classes over the period are provided below.


US equities posted the strongest local and sterling returns over the period, helped by their high exposure to large technology companies. After approving a $1.9tn economic relief package, the US Senate passed a $1.2tn bipartisan infrastructure bill. However, President Biden’s ambitious $1.75tn “Build Back Better” bill suffered a significant setback after his fellow Democratic Senator, Joe Manchin, opposed the bill due to rising inflation, a surging pandemic, and global uncertainty. In Q1 2022, the US equity market started poorly as inflation concerns led to the expectation of a faster than anticipated tightening of monetary policy, which weighed on the performance of sectors such as Information Technology and Consumer Discretionary. However, economic data continued to be robust with the unemployment rate falling to 3.8%.

UK equities were the second-best performing equity market in sterling terms over the year. The reopening of the global economy bolstered the UK’s Energy and Industrials sectors during 2021. However, the UK reported approximately five million Covid-19 cases in Q4 2021 due to the newly discovered Omicron variant, dampening equity returns relative to other regions such as the US and Europe over that quarter. UK equities rebounded strongly over Q1 2022 due to their tilt towards the Energy and Materials sectors. This performance was driven by fears over the supply of oil and other key commodities impacted by the conflict in Ukraine.

European equities posted single digit positive returns in both sterling and local currency terms over the year. Performance over the period was mixed, with positive returns for the first three quarters, supported by the increased vaccine roll-out and reduction in Covid-19 cases, offset by falls in Q1 2022 due to Europe’s close trading relationship with Russia and, in particular, reliance on Russian energy.

Japanese equities delivered a positive return in local currency terms, but a small negative return in sterling terms, as the Bank of Japan maintained its loose monetary policy, in contrast to most central banks, which pulled down the sterling return over Q1 2022. Escalating Covid-19 cases and poor vaccine uptake added to growth worries due to Chinese economic growth and political uncertainty under a new Prime Minister. Economic growth and corporate earnings were impacted by the higher oil price as the country is a large importer of oil. However, there were also fewer inflation worries.

Emerging markets were the worst-performing market in local currency and sterling terms. The rise in interest rates by major central banks resulted in emerging market returns lagging other markets. State regulatory clampdowns across many of China’s corporate sectors and China’s zero-tolerance Covid-19 policy causing several Chinese cities to enter strict lockdown, dampened economic growth. Russian equities collapsed in price, and MSCI and FTSE Russell removed “uninvestable” Russian equities from their widely-tracked emerging markets indices although the weight of Russia is not that large in the equity universe.


UK fixed gilts returned -5.1%, whilst UK index-linked gilts returned 5.1% over the year. UK index-linked gilts significantly outperformed UK fixed gilts due to increased breakeven inflation (a market-based measure for expected inflation, calculated as the yield of a fixed interest bond minus the yield of an inflation-linked bond of the same maturity) driven by expectations of more persistent inflation.

Gilt yields fell in Q2 2021 as variant virus risks and worries over a slower pace of global economic recovery arose. Yields then picked up once more over the third quarter of 2021, driving the negative performance of UK fixed gilts. Yields rose on the back of brought-forward interest rate hike expectations against the background of rising inflation and central bank indications of policy rate increases. However, longer-dated yields briefly fell back in Q4 2021 due to heightened uncertainty surrounding Omicron. Short-dated yields later began to factor in potential monetary policy changes and saw notable increases. In Q1 2022, yields rose strongly across maturities due to expectations of future rate hikes.

Credit markets declined over the twelve months with UK investment-grade credit spreads (the difference between the yields on non-government bonds and equivalent maturity government bonds) widening. In Q2 and Q3 2021, credit markets benefited from risk-on investor sentiment, with credit spreads contracting to ever-tighter levels. Credit markets declined and spreads widened over the second half of the 12 months as government bond yields rose. Hard currency emerging market debt underperformed other segments of credit as higher US yields, a stronger US dollar, and growth concerns in the Chinese market proved a headwind to performance.


UK commercial property returned 23.9% over the period, supported by an income return of 5.1% and an 18.0% increase in capital values. The MSCI UK Monthly Property index reached an all-time high index level over the period. The easing of lockdown restrictions helped the retail sector as it returned 20.8% over the year. Meanwhile, the office sector returned 6.7% and industrials continued to outperform with a return of 42.3%, boosted by heightened demand for logistics due to the pandemic. Vacancy rates fell by 0.5% over the year to 9.8%, whilst rental growth was positive.

In global property markets, strong leasing activities continued in the residential and logistics sectors. The Covid-19 resurgence due to the Omicron variant disrupted office leasing recoveries, although towards the end of the period there started to be evidence of recovery for high quality sustainable assets. The European office rent growth surprised on the upside in 2021, suggesting the market demand was more stable than anticipated. In the US, residential investment continued to grow in the south east and south west markets, and office and retail sectors reported strong year on year growth albeit from a low base.


Infrastructure funds performed in line with their objectives over the year, although diversification across sub-sectors and geographies was critical to returns. Sectors such as communication and utilities saw little or no impact from Covid-19, whilst others such as transportation were impacted more materially. The demand for infrastructure is likely to increase coming out of the pandemic, with a focus on sectors surrounding renewables, the energy transition, and digital infrastructure. Activity across traditional infrastructure assets is likely to continue, but with a reduced focus on crude oil related projects.

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