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.
Newsletter | September 2022
FED CHAIR POWELL CUTS HOPES FOR AN EARLY PIVOT TO RATE CUTS
3.9% THE EXPECTED PEAK LEVEL OF THE FED’S POLICY RATE HAS CLIMBED AGAIN
Investment perspective
The positive sentiment observed in markets since mid-June ended in the middle of August. Equity markets were resilient to rising bond yields intially, but then gave back all of their gains to end the month much lower; the MSCI World Index in local currencies dropped by 3.6%, with European equities underperforming and EM ones holding up better. The rise of bond yields was steep, with European sovereign debt being the most negatively impacted; 2-year Bund yields climbed by 92bps to end August at 1.18%, with 10-year ones rising by 72bps. The size of these moves was reflected by the 4.9% monthly drop of the Euro Broad Investment-Grade Index, dragging it down to a year-to-date decline of 12.9%. The high correlation between bond and equity markets remains entrenched and the comments by Jerome Powell at Jackson Hole only reinforced this relationship. The month of August also saw the US dollar appreciate strongly, as investors turned to one of the only remaining safe haven assets.
Jerome Powell’s Jackson Hole speech was eagerly awaited by investors. The Fed chair spoke for less than ten minutes but that was long enough to trigger a significant fall of equity markets as the S&P 500 Index lost 3.4%. Powell emphasised the central bank’s resolve to hike interest rates to curb inflation. He said that the Fed “must keep at it until the job is done” and that this would bring “some pain to households and businesses”. He pushed back against the notion of raising rates and cutting them soon afterwards. Investors are also bracing themselves for a more hawkish European Central Bank. The ECB is widely expected to raise rates by a half percentage point at its next policy meeting on September 8, with some policymakers even pushing for a more aggressive move to raise rates by 0.75%.
Investment strategy
During our last investment committee, we decided to reduce our equity allocation to underweight. The strong summer rally of equities provided an opportunity to exit some of our positions at higher prices, with the objective to raise the level of cash and to contain some of the portfolios’ volatility. We have mostly, but not exclusively, acted on European positions as Europe remains the most fragile region. The energy crisis, inflation pressures and the increasing risk of a recession have led us to turn more cautious, especially as the recent rally was quickly losing momentum. The level of uncertainty on many issues remains high and, in certain cases, represents too much of a binary risk. The higher level of liquidity will provide more flexibility to rebuild positions if equity markets were to correct in the upcoming months.
Bond markets also still need to find an equilibrium level. The message sent by Jerome Powell means that yields are more likely to keep on rising and at risk of further hurting the prices of equities. As long as bond markets remain as volatile, it will be difficult for other asset classes to stabilise.
WE HAVE REDUCED OUR EQUITY ALLOCATION FOLLOWING THE SUMMER REBOUND
Portfolio Activity/ News
Following a good start, August ended up by being a negative month for the portfolios. With both equity and bond markets posting negative returns, there were only a limited number of positions ending August in positive territory. The best contributions were provided by frontiers markets’ equities, the metal mining fund, the trend-following CTA strategy, emerging markets bonds and equities, as well as high-yield bond funds. European Small Caps and other European equity funds, the global technology fund, and the European sovereign debt fund, due to its long duration, were the portfolios’ main detractors. For portfolios not denominated in USD, the US dollar exposure was a positive contributor.
Despite the negative performance observed in most markets in August, it was somewhat reassuring to note that emerging and frontier markets produced positive returns. At a time when it is challenging to find assets which are less correlated, the broad diversification within the portfolios enables to benefit from these different trends. The fact that Chinese authorities are attempting to stimulate their economy when developed markets are facing more restrictive conditions explains this contrast in terms of market performance.
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Newsletter | August 2022
GLOBAL EQUITIES REBOUND AS BOND YIELDS DECLINE
3.4% THE EXPECTED PEAK LEVEL OF THE FED’S POLICY RATE
Investment perspective
Following a painful month of June for both equity and bond markets, July looked much like a mirror month as both asset classes performed strongly. In fact, the rebound of markets had started in June already, when expectations relative to the Federal Reserve’s terminal fund rate and bond yields peaked. The decline of yields, combined with an overall reassuring reporting of 2Q earnings, helped equity markets to generate outsized gains, with the MSCI World Index in local currencies climbing by 7.9%. US equities outperformed, especially growth stocks, whereas emerging markets underperformed, largely due to the weakness of Chinese equities. The retreat of bond yields continued at a quick pace; 10-year Treasury yields dropped by 0.36% to end the month at 2.65%, with the equivalent Bund yields falling by 0.52% to 0.81%. Credit spreads also tightened significantly, whereas the US dollar’s appreciation came to a halt, at least temporarily, around the middle of the month.
With more than 75% of the S&P 500’s market cap having reported, earnings have beaten estimates by 4.7%, with 71% of companies topping projections. Earnings per share growth is on pace for 9.8%, assuming the current beat rate for the rest of the season. Even if the beat rate was a little lower than that of the previous quarters, companies’ results can be qualified as solid overall, and guidance has tended to be constructive. Investors reacted positively to the publication of the results of mega-caps such as Apple, Amazon, Alphabet and Microsoft, further boosting the ongoing rally of equity markets. The FED press conference following the July 26-27 FOMC meeting was another supportive factor for equities; Chair Jerome Powell suggested that US rates were near their neutral level so that it was an appropriate time for the Fed to move to a strategy of data dependency.
Investment strategy
In our recent mid-year review, we wrote “Our assessment is that a lot of negative news has already been priced in, and market sentiment has become overly depressed”. While we will not pretend to have been anticipating such a strong rally of risky assets in July, it just goes to show how fickle markets have become, and how quickly they can turn around. It also shows that the cutting of exposures when market sentiment is at extreme lows can prove to be very costly. Historical data suggests that equity returns following bear markets, defined as a 20% drop, tend to be well above average over the next two years. That largely explains why we invest over the long term and do not attempt to time the market. We continue to believe that a well-diversified portfolio is the best way to navigate current market conditions, hence our positioning.
Like many we have been astounded by the speed at which some market trends have shifted this year. This reflects an extreme level of uncertainty which has resulted in prices overshooting and undershooting massively. It is still too early to believe we have reached a point of equilibrium following these violent swings so further volatility is to be expected in the months ahead.
MARKETS HAVE REGAINED SOME COMPOSURE WITH CORPORATE EARNINGS PROVIDING REASSURANCE
Portfolio Activity/ News
July was a very positive month for the portfolios, with the vast majority of strategies producing monthly gains. The best contributions were provided by the global technology and multi-thematic funds, European Small Caps, US Value and US Growth, the Medtech & Services fund, as well as European and Japanese equities. The fixed-income asset class also contributed positively, thanks to declining risk-free bond yields and tighter credit spreads. Chinese equities, the trend-following strategy and L/S equities were the portfolios’ main detractors; the negative return recorded by the trend-following CTA strategy in July was to be expected considering the inversion of some well-entrenched trends. For non-USD denominated portfolios, the US dollar exposure was also a contributor.
In July we cut one of our more growth-orientated strategies in favour of more defensive ones. We effectively increased the allocation to the real assets and to the stable equity strategies. The objective of these moves is to reduce some of the portfolio’s volatility and to increase the exposure to less cyclical businesses and to assets offering a higher level of protection against inflation.
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Allnews - La digitalisation de la gestion de fortune, défi ou solution?
La digitalisation de la gestion de fortune, défi ou solution?
Répondre aux attentes d’une nouvelle génération qui cherche la simplicité de fonctionnement, l’accessibilité à ses comptes, la flexibilité et la rapidité d’exécution … à moindre coût.
Depuis la crise des crédits subprime de 2008, la banque privée Suisse a fait face à de nombreux défis. L’explosion réglementaire, la fin du secret bancaire, la révolution digitale, les taux bas, une pandémie… Ces défis ont testé les limites de la structure des modèles d’affaires existant, mettant à jour la fragilité et le manque de flexibilité de nombreux établissements. De tous ces défis, le plus considérable est sans doute la digitalisation des processus et des structures existantes. Nous allons voir comment certains gérants indépendants ont su industrialiser leur modèle d’affaire et pourquoi les grandes banques prennent généralement du retard.
Newsletter | June 2022
GLOBAL EQUITIES REBOUND AMID EXTEMELY DEPRESSED MARKET SENTIMENT
$600 bn THE EXPECTED LEVEL OF EQUITY BUYBACKS IN THE FIRST HALF OF 2022
Investment perspective
May was an archetypal month of two halves for most asset classes. Global equities extended their early-year decline initially before staging a spectacular rebound. This helped the main indices to record flat monthly performances, even if growth and small cap indices were not able to make up all of their early-month losses. The yields of US Treasuries continued to rise fast until May 6 when they began to climb down from a peak level of 3.2% to end the month at 2.84%. It took longer for credit spreads to start contracting but, then again, the movement was swift, for US high yield bonds in particular. The US dollar ended May on a much weaker note after reaching a multi-year high. The trend that continued to be persistent was the appreciation of the prices of most commodities. With the EU’s agreement of new sanctions against Russia in the form of a partial oil embargo, oil prices climbed by close to 10% in May; low expectations for any further increase of OPEC production and the anticipation of a recovery in demand in China also contributed to this rise.
The high level of uncertainty on many issues continues to weigh on markets and on market sentiment. This has led certain well-followed indicators such as the Fear & Greed Index and the AAII Bull/Bear Index to drop to extremely negative readings. From a contrarian viewpoint, such depressed levels often precede equity rebounds and this proved to effectively be the case in May. Amidst all the doom and gloom hovering over the markets, the corporate sector appears to be a brighter spot. This has been reflected by the significant insider buying of shares by companies’ directors as well as an increase of equity buybacks from record levels observed the previous years. US business sentiment remains optimistic regarding demand even if supply chain and pricing issues remain the biggest concerns.
Investment strategy
Some of the latest market movements could be signalling that markets have already priced in a lot of negative news and maybe become too bearish. When looking at historical average stock drawdowns for US equities, the current trough has gone beyond the average non-recession selloff, according to JPMorgan’s quant team. When compared to the average selloffs during recessions, the current drawdown represents around 75% of prior recession bottoms. Were a recession to be avoided, the current market positioning might well prove to be overly defensive. This is reflected by the near record premium of US defensive sectors versus cyclicals. Rather than adopting such a lopsided defensive position, our allocation to equities continues to be well diversified across investment styles, regions, sectors, and market caps.
The past month saw a pause in the rise of US bond yields as well as a decline from peak expectations relative to the end-2022 implied Fed Fund rate. Were these expectations to be anchored around the current levels, this could provide some support for markets.
MARKETS REMAIN VOLATILE AS RECESSION RISKS AND HIGH INFLATION DOMINATE INVESTORS’ MINDS
Portfolio Activity/ News
May was a negative month for the portfolios. Even if many global equity indices recorded flat monthly performances, several of our growth-orientated strategies finished in negative territory. Japanese equities, the multi-thematic fund, US small caps and equities of frontier markets were amongst the portfolios’ main detractors. Positive contributions were provided by the European and US Value funds, Chinese equities, the L/S equity strategy, as well as the global technology fund. Most of the bond positions ended with limited losses as US rates started to stabilize and credit spreads contracted towards the end of May. For non-USD denominated portfolios, the US dollar exposure was a detractor in view of the decline of the US currency from its May multi-year high.
We recently attended an event where many fund managers presented their strategies. Whereas equity managers tended to remain unsure about the next move in equity markets, bond managers proved to be more optimistic. Following extensive spread widening, the consensus was that the market now offers decent opportunities in view of much higher carry and solid fundamentals. They also highlighted the fact that refinancing needs remain very low as most companies have taken advantage of record low yields the past years to boost their balance sheets.
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Newsletter | May 2022
GLOBAL BONDS RECORDED THEIR WORST EVER MONTHLY DROP
- 13.3% THE TORRID MONTH OF APRIL FOR THE NASDAQ COMPOSITE
Investment perspective
The month of April was a brutal one for financial markets. In an environment where bond yields continued to rise at a fast pace, and the appreciation of the US dollar accelerated, equity and bond markets both ended the month much lower. The MSCI World Index in local currencies plunged by 7%, mainly due to the weak performance of US equities. The Bloomberg Global-Aggregate Total Return Index, a broad bond index, lost 5.5% and recorded its biggest monthly drop since its inception in 1990. 10-year Treasury yields rose by 60bps to end April at 2.94%, and Bund yields with a similar maturity moved up to 0.94%, an increase of 39bps; credit and emerging market debt were also impacted by a widening of spreads. The overall strength of the US dollar was reflected by a 4.7% depreciation of the EUR/USD parity to 1.055, a level last observed more than five years ago.
The main drivers of markets in April were the increasing hawkishness of the Federal Reserve, as well the reporting of first quarter earnings. Markets are now pricing in a 50bps rate hike in May, with same-size hikes also likely to be announced at the following meetings. With more than 80% of the S&P 500’s market cap having reported, earnings are beating estimates by 6.5%, with 77% of companies topping projections. These solid results have not prevented US equities from getting battered during the past month. Some of the darlings of the past years, which contributed largely to the strong outperformance of US equities relative to other regions, have been experiencing a significant derating. Investors have punished high-growth companies such as Netflix which saw subscribers fall for the first time in a decade. Soft guidance from Amazon, a supply constraints issue for Apple and disappointing earnings from Alphabet are just some of the reasons for the poor performance of these companies’ stocks in April.
Investment strategy
We are maintaining the current allocation of our portfolios amidst very depressed market sentiment. The Fear & Greed Index is in fear territory, whereas the AAII bull/bear Index is showing the highest level of pessimism since March 2009. Investors are facing massive uncertainty on a number of issues, and markets have become over reactive and prone to huge swings. At the time of writing the Federal Reserve has just hiked by 50bps, as fully expected, but US equities rallied by 3% after Jerome Powell ruled out the possibility of a 75bps hike at a forthcoming meeting. This move appears overdone but reflects the current level of noise across the markets and we prefer to look further ahead and not attempt to trade the market daily.The month of April was another very tough month for fixed-income assets, but we might be approaching a point where the timing looks more favourable for the asset class. A lot of adjustment in risk-free rates has already taken place in view of the expected tightening of central banks, and the outlook for credit remains supportive.
WITH MARKET SENTIMENT BEING DEPRESSED, MARKETS COULD STAGE A NEAR-TERM REBOUND
Portfolio Activity/ News
April was a negative month for the portfolios. With both the equity and fixed-income asset classes recording monthly losses, it proved to be a very difficult market environment. The main detractors were the multi-thematic growth fund, US Small Caps, the technology fund, Japanese and Chinese equities, and European Small Caps. The recently added global equity fund exposed to companies with stable returns was resilient as were some emerging market exposures. In the fixed-income asset class, the losses of our exposures were generally less than those of their reference benchmarks, even if the fund with longer duration was obviously badly hit by fast-rising rates.
On a more optimistic note, alternative strategies have continued to outperform and to fulfill their diversification role within the portfolios. Several hedge funds provided positive contributions, in particular the trend-following CTA strategy, thanks to its significant short exposure to rates. For non-USD denominated portfolios, the appreciation of the US dollar also contributed positively to the performance.
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Newsletter | April 2022
MARKETS STAGED A STRONG REBOUND FOLLOWING INITIAL HIT AS WAR BREAKS OUT IN UKRAINE
+ 51bps THE STEEP RISE OF 10-YEAR TREASURY YIELDS IN MARCH
Investment perspective
The month of March was characterised by two distinct periods for financial markets as early-month weakness was followed by a strong rebound of risk assets. The MSCI World in local currencies gained 2.9%, with the S&P 500 ending 3.6% higher, whereas the Euro Stoxx 50 dropped by only 0.6% after recovering most of its early-month losses. This performance of equities was quite impressive considering the dramatic events in Ukraine, and also in view of the significant rise of bond yields. An increasingly hawkish Fed triggered a 51bps rise of 10-year Treasury yields, with 10-year Bund yields also jumping by 41bps. In FX markets, the US dollar appreciated while the Japanese yen plunged by 5.5% vs. the USD, mainly as a result of the diverging monetary policies between the Bank of Japan and the Federal Reserve. It was another strong month for commodity prices, even if those of energy and gold ended the month well below early-March peak levels. Gold spiked to $2’050 per ounce on March 8, before declining significantly to finish the month at a level of $1’937 per ounce.
Since the beginning of the year, bond markets have had a rough ride and the drawdown of bond indices has been severe. This has been firstly due to the impact of the Federal Reserve’s very hawkish shift towards both higher rates and a faster pace of these hikes, and also the upcoming contraction of the central bank’s balance sheet. Markets are now pricing in a 50bps rate hike at the May’s FOMC meeting, with other 50bps hikes also appearing as likely. Corporate credit markets have also been hurt by significant spread widening, whereas positions in Russian and Ukrainian debt has severely hurt investors exposed to issuers from these countries. The first-quarter performances of the main bond indices range from -5% to -10%, meaning that they have more or less been in line with the performances of equity indices.
Investment strategy
We are pleased to report that our end-February decision not to cut equity positions at the onset of the war in Ukraine has been vindicated in view of their strong recovery since early March. Our assumption was that the war, as dramatic as any conflict always is, would have only a limited and temporary effect on markets, as often observed historically. Our equity allocation has recently been reduced and, were equities to record further gains, we intend to continue moving their exposure towards a neutral positioning.
The fixed-income asset class has had a challenging start to the year, due to fast-rising rates and wider credit spreads. As a reminder, our allocation to the asset class is underweight, in particular towards investment-grade, and the duration is low overall. Last year’s gradual shift towards more market-neutral strategies such as event-driven or long/short credit has been very helpful this year. These strategies have been much more resilient and much less volatile than most long-only fixed-income strategies.
MARKETS COULD WELL REMAIN RANGEBOUND IN THE NEAR TERM
Portfolio Activity/ News
March was a positive month for the portfolios. There was a significant amount of dispersion between the performances of the different funds. Most fixed-income exposures posted negative returns whereas the majority of equity funds ended the month with gains. The best contributions were provided by the metal mining fund, the trend-following CTA strategy, the real assets fund, and the recently added global equity fund. The main detractors were the Chinese equity fund, one of the high yield strategies, as well as long duration bond funds. For non-USD denominated portfolios, the appreciation of the dollar also contributed to the positive performance.
In March, we trimmed some of the positions having outperformed and thus raised the portfolios’ level of cash. We took advantage of the strong rebound of equity markets from their early-March lows to carry out these transactions. We also boosted the exposure to the US dollar and have hence reduced its underweight compared to the reference index. For the balanced portfolios which are not denominated in dollars, the allocation has increased from 10% to 15%.
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