Newsletter | January 2023
MARKETS MAKE A STRONG START TO THE NEW YEAR
+ 10.7% THE JANUARY RISE OF THE NASDAQ COMPOSITE INDEX
Investment perspective
Financial markets got off to a very positive start in 2023 as investors took the view that the likelihood of a soft landing was rising despite the hawkish tone from the Federal Reserve and the European Central Bank. In this risk-on environment, the vast majority of equity markets posted above-average monthly gains, long-term bond yields decreased, credit spreads tightened, and the US dollar continued to depreciate. The MSCI World index in local currencies climbed by 6.4%, with the Euro Stoxx 50 index rising by 9.7% and the Hang Seng index by 10.4%. The yield on the 10-year Treasury note dropped by 36bps to 3.51%, with US and European high yield credit spreads contracting by 49bps and 68bps respectively. Other strong gains were also observed on industrial metals, as a result of the anticipation of renewed demand from China, and on the price of gold. Maybe a little surprisingly, oil prices ended the month lower, despite the boost from the reopening of China, while gas prices continued to slide at a fast pace.
At the time of writing, the Federal Reserve has just hiked its Fed fund rate by 0.25%, as fully anticipated. The more relevant outcome of the FOMC meeting were the comments by the Fed’s chair, Jerome Powell, on the future path of the Fed’s policy. Powell repeated that more rate increases were needed and that rate cuts in the second half of the year were unlikely. This goes against markets’ expectations for two rate cuts by the end of 2023. What was more surprising was that Powell did not push back more against the recent easing of financial conditions, leading markets to extend their early-year rally, with equities ending the trading session higher and bond yields declining. The ECB and the Bank of England also matched market expectations by hiking interest rates by 0.5%. The ECB signaled its intention to raise interest rates by another 0.5% in March and will then evaluate its policy depending on data. As was the case after the Fed’s decision, markets are continuing to rally, with bond yields dropping quite noticeably.
Investment strategy
At the onset of 2023, our asset allocation is composed of an underweight equity exposure, an allocation to fixed income which is close to neutral and an overweight exposure to hedge funds. Taking account of the strong performance of equities in January, we are sticking to this asset mix for the time being. We fear that markets could be overconfident in their dovish outlook relative to monetary policies and to the path of earnings. With bonds offering positive yields once again, we believe that it makes sense to hold more balanced portfolios and no longer to rely just on the equity asset class to generate portfolio performance. It is also reassuring that the current valuations of some of the traditional assets offer a better starting point for future portfolio returns than a year ago, when only a few of them could be considered cheap. Global value stocks, emerging and European equities, as well as investment grade credit are some of the assets that offer attractive valuations.
For non-USD denominated portfolios, our allocation to the US dollar remains underweight but we prefer to wait before reducing it further. From a medium to long-term perspective we would expect the dollar to depreciate but it continues to offer defensive qualities were markets to turn.
MARKETS INCREASINGLY POSITIONING FOR A SOFT LANDING SCENARIO
Portfolio Activity/ News
January was a strong month for the portfolios. With both bond and equity markets rising simultaneously, the majority of funds contributed to the performance, as to be expected. European Value equities, the metal mining fund, the global technology fund, Chinese equities, and the US Value fund provided the best contributions within the equity asset class. The only equity detractor was the healthcare fund, as the more defensive sectors such as healthcare, consumer staples and utilities ended the month lower. The best performers in the fixed income asset class were emerging market corporate bonds and the long duration investment-grade fund. In the alternative space, the Global Macro fund provided the best contribution, whereas one of the long/short equity funds, with a barely positive net exposure currently, ended the month with a small loss. The other hedge funds provided only marginal contributions.
Following a tough year for many strategies, we are confident that active managers will be able to generate more alpha in 2023. We would expect market dispersion to be high and to represent a favourable environment for good stock pickers. This extensive dispersion should also be helpful for hedge fund managers, and we are comfortable with our overweight exposure to these alternative strategies.
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Perspectivas de inversión 2023
Resumen de nuestras previsiones
2022 ha sido uno de los años más duros de la historia para los inversores
Este último año ha sido realmente brutal para los inversores. El endurecimiento de las políticas monetarias no sorprendió a nadie pero fue mucho más duro y dañino de lo que se esperaba en muchas clases de activos. El apresurado endurecimiento de las políticas monetarias ante la constante presión inflacionaria y la guerra en Ucrania fueron los mayores causantes del fuerte debilitamiento de los mercados. La política china «Covid Cero» también atizó otro golpe dado que su economía se comportó mucho peor de lo previsto. En un entorno de aversión al riesgo (risk-off) apenas quedaban sitios donde refugiarse y esto se reflejó en los penosos resultados de los bonos del Tesoro que se suelen considerar como activos más seguros. La volatilidad de los mercados de renta fija llegó a niveles críticos y siguió siendo muy alta durante la mayor parte del año. Esta tensión salpicó a otras clases de activos y el mayor grado de correlación entre renta variable y renta fija supuso que la diversificación no sirvió para proteger bien a los inversores de pérdidas en las carteras.
El vertiginoso ritmo del endurecimiento de la política monetaria de la Reserva Federal
2022 será recordado como el año en que la era de las políticas monetarias exageradamente acomodaticias llegó a su fin. Desde la Gran Recesión, los principales bancos centrales fueron bajando sus tipos de interés a cero o incluso a cifras negativas. Los inversores ya se esperaban la subida de los tipos de interés y la contracción de los balances de los bancos centrales en 2022, pero no estaban preparados para lo que ocurrió realmente. El cambio de la Reserva Federal de una política monetaria exageradamente complaciente a una muy restrictiva se produjo en tan solo unos meses, dado que crecieron rápidamente las subidas, del 0,25% en marzo al 0,75% en las siguientes cuatro reuniones del Comité Federal del Mercado Abierto (FOMC) celebradas entre junio y noviembre. El banco central estadounidense subió sus tipos de interes un 4,25% en 2022 para situarse entre el 4,25% y el 4,50% y aunque otros bancos centrales principales siguieron sus pasos, lo hicieron a un ritmo más pausado. Las últimas decisiones con respecto a los tipos de interés y los comunicados de los principales bancos centrales han confirmado su política restrictiva y su empeño en bajar la inflación.
Los inversores siguen centrados en las tendencias de la inflación y la geopolítica
Se espera un menor crecimiento del PIB en 2023 con un alto riesgo de que la economía mundial entre en recesión dado que las expectativas de crecimiento de los Estados Unidos y Europa son entre muy bajas y negativas. Gran parte dependerá del ritmo de deceleración de la inflación y de la trayectoria de las subidas de los tipos de interés. La tarea de los bancos centrales a través del mundo es extremadamente exigente y los riesgos de provocar daños por una política equivocada son mucho mayores de lo normal. Las perspectivas económicas podrían mejorar si China finalmente logra reabrir su economía con éxito. Las amenazas geopolíticas permanecen elevadas. Hay muchos focos de tensión en el mundo pero no se puede descartar la posibilidad de que se produzca algún acontecimiento positivo aunque no tengamos muchas esperanzas.
Ante el alto grado de incertidumbre seguimos siendo precavidos en la asignación de activos
El endurecimiento de las políticas monetarias ha eliminado ciertas distorsiones y excesos de los mercados observados en los últimos años, lo que implica que los ratios fundamentales deberían cobrar más relevancia ahora que ha terminado la era del dinero fácil. Las valoraciones han mejorado en la mayoría de las clases de activos, pero sigue persistiendo la incertidumbre en muchas cuestiones. Pese a la caída del año pasado, la renta variable sigue atravesando turbulencias. Esto justifica en gran medida por qué nos aferramos a nuestra sobre ponderación en estrategias alternativas y por qué hemos incrementado nuestra exposición a la renta fija hace poco dada la mejoría de su perfil rentabilidad/riesgo.
ÍNDICE
- RESUMEN DE NUESTRAS PREVISIONES
- 2022: REPASO DE NUESTROS TEMAS DE INVERSIÓN
- 2022: ACONTECIMIENTOS ECONÓMICOS Y POLÍTICO
- 2022: LOS MERCADOS FINANCIEROS
- 2023: PERSPECTIVAS ECONÓMICAS
- 2023: PERSPECTIVAS DE LOS MERCADOS FINANCIEROS
- 2023: ASIGNACIÓN DE ACTIVOS
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Newsletter | December 2022
THE DOLLAR INDEX HAD ITS WORST MONTH SINCE 2010
+ 26.6% THE REBOUND OF THE HANG SENG INDEX IN NOVEMBER
Investment perspective
November was a strong month for capital markets, as both equities and bonds performed well. For once, emerging markets’ equities outperformed those of developed ones; Chinese equities rallied massively due to a dramatic shift of investor sentiment in the wake of the end of October selloff. The MSCI EM index climbed by 14.6%, compared to a 5.5% gain for the MSCI World index in local currencies, whereas the Euro Stoxx 50 index gained 9.6%. These equity gains were accompanied by another negative month for the US dollar; the 5% monthly drop of the dollar index was effectively its worst since September 2010, and this move contributed significantly to the overall improved market sentiment. The decline of long-term bond yields was another supporting factor for risk assets; the yields of 10-year Treasuries and Bunds declined by 44bps and 21bps to 3.61% and 1.93%, respectively, resulting in increasingly inverted yield curves. Credit and emerging market debt spreads continued to contract at a fast pace. Significant moves were observed in the commodity space also, with the price of gold rising strongly whereas oil prices dropped by more than 6% on concerns about weaker demand.
As in October, one of the drivers for the stronger markets was the narrative that the Federal Reserve was likely to slow the pace of its interest rate hikes. The US central bank is widely expected to rise rates by 50bps at its December meeting following a string of 75bps increases. The fact that the latest inflation data in the US have been below expectations has contributed to the market’s optimism relative to the path of the Fed’s policy. The market could, however, be at risk of underestimating the terminal Fed fund rate in view of the very resilient job markets, and the fact that the Fed will want to avoid making a mistake by ending its hiking cycle prematurely.
Investment strategy
The recent rebound of equity markets has obviously been most welcome for the portfolios, but we are reluctant to add to our current equity allocation and we maintain our modest underweight positioning. In our opinion, markets could be overconfident that central banks will soon be ending their hiking cycle. The upcoming economic slowdown could also be accompanied by a declining growth of earnings, as margins contract from record highs, hence our caution.
On the other hand, we think that bond markets offer a more attractive risk/reward at present, and we will be increasing some of our exposures. Investment-grade credit, and funds having the flexibility to manage both duration and credit quality are our current top picks. These funds can allocate to some of the more attractive segments of the bond markets, in areas such as subordinated bonds of investment-grade companies, corporate credit and financials, and corporate hybrids.
MARKETS ARE AT RISK OF UNDERESTIMATING THE TERMINAL FED FUND RATE
Portfolio Activity/ News
November was a positive month for the portfolios thanks to the strong returns of equities and also of bond markets. The best contributions were provided by Chinese and emerging equities, metal mining companies, the European value fund, emerging market corporate bonds, the technology fund and long duration investment-grade bonds. For portfolios with an exposure into gold, it proved to be a rewarding month as the precious metal climbed by 8.3%, as it benefited from lower real bond yields and the weaker dollar. The number of detractors was low. The depreciation of the dollar hurt portfolios not denominated in USD, as did the drop of the trend following CTA strategy, US small caps and the multi-thematic fund.
We were pleased to observe the massive rebound of our Chinese equity fund in November. In last month’s newsletter, we had highlighted why we believed it still made sense to be exposed to Chinese equities, and the recent upside move just shows how difficult it can be to predict trends. It also shows how sentiment is continuing to drive the markets, with the shift in China’s Covid stance towards a loosening of some restrictions contributing to boost market sentiment.
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Newsletter | November 2022
DEVELOPED MARKETS’ EQUITIES REBOUND BUT INVESTORS DUMP CHINESE EQUITIES
+ 7.1% THE PERFORMANCE OF THE MSCI WORLD IN OCTOBER
Investment perspective
Following a dreadful September, the month of October provided much welcome relief for investors thanks to a rebound of developed markets’ equities. One of the main drivers for this rally was the perception that key central banks might be getting closer to slowing the pace of their rate hikes following the decisions by the Bank of Canada and the Reserve Bank of Australia to raise interest rates by less than expected. The rise of equities was accompanied by a pause of the US dollar rally, tighter credit spreads, and an upwards move of the US yield curve. A significant underperformance of emerging market equities was also observed, as they recorded a monthly drop, largely as a result of Chinese equities plunging further from already depressed levels. In terms of investment style, Value outperformed Growth, and energy was the best performing sector, supported by rising oil prices. October also provided a much needed return to calm for UK assets after the replacement of Liz Truss, who became the shortest serving UK prime minister, by the former chancellor Rishi Sunak. The UK yield curve shifted down materially, with 2-year and 10-year Gilt yields dropping by 95bps and 58bps, respectively, whereas the pound recovered some of its recent losses.
With more than 80% of the S&P 500’s market cap having reported, earnings have beaten estimates by 3.6%, with 66% of companies topping projections. Earnings per share growth is on pace for 5.9%, assuming the current beat rate for the rest of the season. Even if the beat rate was inferior to those of the previous quarters, amid lowered earnings’ expectations, companies’ results proved to be supportive for equity markets overall. What was quite striking was that equity markets continued to rise even if the share prices of some of the US mega-caps, including Amazon, Alphabet, Microsoft and Meta, were badly hit by a set of disappointing reportings.
Investment strategy
At the time of writing this newsletter, the Federal Reserve has just announced another 75bps rate hike, as expected by the markets. What was less anticipated was the tone of Jay Powell’s press conference; equity markets had been rallying on the assumption that the Fed could be approaching the end of its hiking cycle and could even cut rates next year. Fed chair Powell made it clear that the US central bank still had work to do, and that real interest rates had to turn positive, implying that markets’ expectations were too optimistic in relation to future Fed fund rates. We were not in the camp expecting the Fed to turn more dovish, and this explains why we had not increased our equity exposure. In reason of the deterioration of the global economy, restrictive monetary policies, and a risk of further earnings’ downgrades, we have maintained our equity underweight.
It has been a disappointing month for Chinese equities, but we continue to believe that an exposure to the country still makes sense despite the ongoing headwinds. Overly cheap valuations, a significantly underweight positioning by foreign investors, and the prospect of some policy support are just some of the main reasons why we remain invested.
MARKETS HAD PINNED THEIR HOPES ON MORE DOVISH CENTRAL BANKS ONCE AGAIN
Portfolio Activity/ News
October was a positive month for the portfolios thanks to the rebound of developed markets’ equities. US and European Value funds, metal mining equities, the Healthcare fund, and US small caps provided the best contributions. The positive return of portfolios was, however, dented severely by the exposure to Chinese equities, and to those of emerging and frontier markets. The overall contribution of fixed-income was negative due to the declines of emerging market debt and the long duration investment-grade fund, even if convertible bonds did provide some positive returns. The overall contribution of the alternative exposure was neutral, with the recently added L/S US small cap fund continuing to perform well. For portfolios not denominated in USD, the depreciation of the US dollar was a detractor.
In October, we added a high yield bond fund to our list of approved funds. The particularity of this fund is that it is managed based on a fixed maturity approach, with the fund ending at the end of 2026. This means that all the underlying bonds will have maturities with a maximum of six months longer than the end of 2026.This approach is more defensive than a traditional bond fund, as risk factors such as credit risk, duration and volatility, decrease over time. We believe that the next months could provide a good entry point for the strategy, if credit spreads were to widen more.
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Newsletter | October 2022
MARKETS BATTERED BY INFLATION AND HAWKISH CENTRAL BANKS
1.033 THE BRITISH POUND PLUNGES TO A RECORD LOW AGAINST THE DOLLAR
Investment perspective
The early-month optimism of investors in September quickly gave way to severe market angst due to higher-than-expected inflation data and hawkish central banks. In a scenario often observed this year, yield curves moved up materially and equity markets tanked. The Local Currency MSCI World Index plunged by 8.5%, with US and EM equities underperforming and European ones faring somewhat better. The rise of bond yields was steep, and key bond indices dropped between 3% and 5%; 2-year Treasury yields climbed by 76bps to end September at 4.2%, with 10-year ones rising by 64bps to 3.8% after briefly breaching 4%. The moves on UK sovereign debt proved to be even more dramatic; 2-year and 10-year Gilt yields jumped by 122bps and 129bps, respectively, as markets reacted poorly to new UK government tax policies. The appreciation of the US dollar accelerated during the month, with the Japanese yen and the British pound finding themselves under particularly acute selling pressure; for the first time since 1998, Japan intervened in the currency market to support its currency, and it took an emergency statement by the Bank of England to help the pound to recover some of its losses.
As expected, the Federal Reserve hiked interest rates by 75bps in September to a 3%-3.25% range. The bank’s Chair Jerome Powell also delivered a more hawkish message, leaving little doubt that more outsized hikes would be announced at the upcoming meetings, leading to an end-2022 rate of 4.5%. The ECB also increased rates by 75bps last month, at the high end of market forecasts. The ECB is currently widely expected to rise rates by another 1.25% by the end of the year to a level of 2%. Markets are now anticipating the ECB’s policy rate to be increased to around 3% in 2023, a significant ramp up of expectations compared to only a few weeks ago.
Investment strategy
Following the reduction of our equity positioning last month, we did not change our asset allocation in September, with both equity and fixed-income asset classes remaining under-weight. In contrast, the exposure to alternative strategies is overweight and has contributed to limit some of the market volatility, and to preserve capital in these challenging market conditions. Our assessment is that markets are still struggling to correctly price in the path of monetary tightening, and the instability of bond markets continues to negatively impact all the other asset classes. The ongoing strength of the US dollar is another factor which is preventing any significant rebound of equity markets. In view of the extreme level of uncertainty on key issues, including geopolitical risks, rising interest rates, inflation, currencies and Chinese economic growth, visibility is extremely low, and forecasts are of little help.
In this environment, we try to filter out the short-term noise and prefer to invest over the long term, and not attempt to time the market. We continue to believe that well-diversified portfolios are the best way to navigate in the current market environment.
MARKET VOLATILITY IS LIKELY TO REMAIN HIGH IN THE NEAR TERM
Portfolio Activity/ News
September was a brutal month for portfolios as both bonds and equities recorded steep losses. Alternative strategies outperformed long-only exposures significantly and, for portfolios not denominated in USD, the US dollar exposure was a positive contributor. The trend-following CTA strategy provided the unique positive contribution while other hedge funds were either flat or only marginally negative. The main detractors were the real assets fund, badly hurt by higher bond yields, Chinese and EM equities, the global technology fund, as well as various Value funds. In the fixed-income space, investment grade sovereign debt funds with a longer duration and EM bonds fared the worst, whereas credit funds with some flexibility managed to outperform their reference benchmarks strongly and to limit the impact of pronounced market drawdowns.
In September, we cut one of our Japanese exposures due to a risk management measure in view of the fund’s declining assets. For some portfolios, we replaced this position by a newly-approved long/short fund focused on US small and mid caps. This fund has a very limited net long exposure and has low levels of beta and correlation with the market. At a time when equity markets are very volatile, and dispersion is wide, this kind of strategy offers a differentiated source of performance and diversification within the portfolios.
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Relevo de antorcha en Forum Finance
Relevo de antorcha en Forum Finance
Ginebra, 28 de septiembre de 2022 – El gestor de patrimonio independiente con sede en Ginebra, The Forum Finance Group SA, anuncia el nombramiento de Hippolyte de Weck como CEO a partir del 1 de octubre de 2022. Sustituye a Etienne Gounod, que pasa a ser presidente del Consejo de Administración. Este relevo generacional en la dirección de la empresa se enmarca en el sistema de gobernanza que Forum Finance viene aplicando desde hace años, que organiza la jubilación gradual de los socios a partir de los 65 años. Aunque muchas empresas de gestión independientes no podrán obtener su licencia de la FINMA antes de finales de diciembre, Forum Finance ofrece un sólido marco empresarial a los gestores de activos que buscan una estructura que les permita seguir ejerciendo su profesión.
Hippolyte de Weck se incorporó a Forum Finance como socio administrador en 2011. Anteriormente, trabajó durante 17 años en el Grupo UBS, ocupando diversos puestos en las áreas de emisión de bonos, gestión de riesgos y gestión de patrimonios privados en Fráncfort, Zúrich y Ginebra. Sucede a Etienne Gounod como CEO, que deja el Comité ejecutivo para convertirse en presidente del Consejo de Administración.
«Nuestras normas de gobierno interno establecen que, a los 65 años, los socios se retiran gradualmente para dejar paso a la siguiente generación. Después de 13 años como CEO y 19 años como socio administrador, ha llegado el momento de que deje la dirección operativa de Forum Finance y me centre en la estrategia a largo plazo de la empresa como presidente del Consejo«, dijo Etienne Gounod.
Una estructura y una gobernanza sólidas
Con 28 años de crecimiento constante, Forum Finance ha demostrado su perennidad. Su gobernanza sólida y transparente garantiza la continuidad de su liderazgo y le permite acoger a nuevos socios para asegurar la sucesión. Con 2.000 millones de CHF gestionados, dispone de recursos suficientes para financiar su futuro crecimiento. Esta solidez se ve reforzada por la licencia de la LPCC, que le permite ampliar su gama de servicios a la gestión de fondos de inversión y productos de pensiones. Por último, registrada en la SEC, Forum Finance también puede ocuparse de los clientes estadounidenses.
Ofrecer una solución convincente a los directivos que deseen continuar su actividad
En vista de la agitación que experimentará el sector suizo de la gestión independiente en los próximos meses, Forum Finance pretende desempeñar un papel activo en el próximo proceso de reestructuración, en particular ofreciendo un marco creíble para los gestores de activos cuya empresa no obtenga la licencia de la FINMA, que será obligatoria a partir del 1 de enero de 2023.
«Las advertencias y las cifras publicadas por la FINMA en agosto indican claramente que cientos de sociedades suizas de gestión de activos no obtendrán la preciada licencia a tiempo. Nuestro tamaño, la estructura que ya hemos puesto en marcha, nuestras perspectivas de desarrollo y las posibilidades que ofrecemos para acceder al capital hacen que Forum Finance sea una solución especialmente convincente para los gestores de activos que buscan un nuevo entorno en el que continuar su actividad», explicó Hippolyte de Weck, CEO.
Para más información, póngase en contacto con:
Egon Vorfeld
The Forum Finance Group SA
T: +41 (0)22 552 83 00
E: vorfeld@ffgg.com
ffgg.com
Ricardo Payro
Payro Communication Sàrl
T: +41 (0)79 460 57 74
E: :rp@payro.ch
payro.ch
Acerca de Forum Finance
Fundada en 1994 en Ginebra, Forum Finance ofrece servicios de gestión privada y gestión de activos a clientes de alta gama. Cuenta con 25 empleados que gestionan y supervisan 2.000 millones de francos suizos en activos. Bajo una licencia LPCC, la compañía está regulada y supervisada por la FINMA y está registrada en la SEC como asesor de inversiones.
