| The fund struggled to find a strategy in these erratic and violent market moves, ending the month with a decline of -2.92% compared with a gain of 0.55% for its reference index. A batch of weaker than expected economic data, including a loss of momentum in the US services sector and signs of ebbing in consumer confidence, combined with a sharp revision to global earnings estimates suggesting a drop to recession in the coming months, prompted us to cut our net equity exposure to 10% during the first week of the month. We captured only part of the technical rebound in the second half of the month with an average net equity exposure of c40% (50% by mid-February, 30% by the end of the month). Our cautious view on the global economy, together with our expectations of lower rates for long, led us to reinforce our allocation to government bonds (7-10+years maturities). We have also initiated a position in gold (3.8% of the portfolio), via an ETF tracking the gold price, as an additional tool to protect the portfolio in case of market turbulences. We think that over the near term, market volatility will remain elevated due to persisting weakness in China, uncertainty about the path of US tightening and the magnitude of change in long-term rates around the globe. Subdued global inflationary pressures cast doubt about the effectiveness of QE and many have begun to question whether central banks are running out of ammunition in their attempt to stimulate the economy. Political issues can also erode investors’ sentiment in the coming weeks. The European refugee crisis is likely to impact regional and national elections over the 18 coming months, adding to the risk of a “Brexit”. The Greek saga has also the potential to resurface again. Central banks’ meeting in March remain sources of uncertainty. The ECB is widely expected to act aggressively as it can no longer disappoint like in December, at the risk of causing a surge in the euro and a drop in inflation. We are unconvinced that the Fed and the Bank of England will engage in a tightening cycle any time soon but a more hawkish than expected tone could still unsettle markets.
MC Bolero fact sheet Feb 16 USD – EN
MC Bolero fact sheet Feb16 EUR – FR
The following two tabs change content below.