Income Generation / Total Return

7% p.a., net of fees

Daily

Luxembourg-regulated AIF

30 April 2020

Beauclerc Limited

Manager comment

Historically, September was rarely a great month for global equities. Last month proved to be no exception, with US, EZ and EM equity indices ending September with losses ranging from -3.5% to -5.3%. YTD gains remain hefty but the bull trend in global equities initiated in Q 4 2020 is now broken. Multiple downside pressures impacted investors’ confidence in the past few weeks, starting from the confirmation by the Fed that the monetary emergency measures will end by mid 2022, paving the way for the first rate hike in H 2 2022, earlier than indicated at the previous FOMC in June. In addition, global GDP growth for Q 3 2021 had to be revised down (except in EZ) due to mounting capacity shortages and supply chain disruptions in both DM and EM economies, making inflation looking less transitory than expected by Central Banks. This stagflation risk has increased, driving DM bond yields higher but for the wrong reason, which is why their correlation with global equities turned negative last month. By contrast in the past 3 quarters, higher yields were driven by greater activity momentum, leading to higher earnings growth which ultimately was supporting equities. With Nike and Fedex warning on their Q 3 earnings, earnings forecasts are at risk and the fear is that the coming reporting season confirms that the peak in earnings has been reached. This would be bad news for equity valuations in a rising inflation environment. In addition, the default of the largest Chinese property developer, Evergrande, did reinforce the stagflation risk as well. Although the contagion to the global financial system should be contained, the impact on Chinese construction and manufacturing sectors could be significant if the Chinese authorities do not step in to organise an orderly default. Finally, US politics came back on the radar screen, with President Biden’s inability to find a consensus at Congress to avoid a federal government shutdown. As a result, the vote and the size of its infrastructure plan are at risk and ultimately the US GDP forecasts.
The equity correction created the higher volatility regime needed to reinvest in full the portfolio in volatility income notes with attractive yields. As a result, the income fixed by the selection of short puts on equity indices was increased and the Fund’s total gross income remains at 8.5% p.a.. The disappointing September return came from the negative mark to market valuations (in excess of 0.80% to be recouped by year end).

YTD

  • Cumulated Performance
  • Share class A

As of 08/10/2021

3 months

  • Cumulated Performance
  • Share class A

As of 08/10/2021

1 year

  • Cumulated Performance
  • Share class A

As of 08/10/2021

3 years

  • Cumulated Performance
  • Share class A

As of 08/10/2021

All

  • Cumulated Performance
  • Share class A

As of 08/10/2021