Monthly management comment
Macro & Politics: “Trump does it again”
President Trump could not help adding more trouble to a gloomy x-mas season by entering a bold power struggle on the financing of the Mexican wall. The US economy both ended the year and started the new one with a partial shut-down and quite a lot of uncertainty on how long this blockade could last. Inves-tors and public opinion seem tired of these never-ending controversies. This happened while markets were falling and many macro aggregates were dete-riorating. What markets seemed to anticipate is unfolding: slowing growth and dwindling confidence. Nevertheless, the Fed increased as expected its rates in December meeting even though the underlying tone was less hawkish. But the main concerns on overall growth came from China with a sharp deceleration triggering worries on many European and US companies exposed to its market. We expect Chinese authorities to initiate various stimulus packages in order to install a revigorated investment environment. In Europe, May continues to strug-gle with her Brexit deal and the lack of visibility is taking its toll on the GBP and the general confidence.
Markets: “mensis horribilis ”
All major Equity markets were down between -5.4 % (Eurostoxx 50 ) and – 10.5% (Nikkei 225) making the month of December the worst since the 1930’s. Early in the month, there were few tangible news to explain the spectacular drops as markets seemed driven by mainly psychological forces but the recent profit warning from Apple added a lot a fuel to the bears and spreading losses to most technology stocks (Nasdaq down 9.5%).
We were caught off guard by the speed of the corrections and suffered with our risk exposure as we lacked a significant position in one of the few sectors that prevailed, pharmaceuticals. Aulien ended the year with a loss of 10.5% compared with Eurostoxx 50 at -14.3%, European High Yield Bonds at -3.9% and Barclays Pan Eu Bonds flat. AMS continued to slide dramatically on the back of Apple’s profit warning but has rebounded well into the new year. We will closely follow earnings stock by stock in order to grasp specific company situations as we feel that the market has thrown the baby out with the bath-water.
Forthcoming management changes: “merger of the two Aulien funds”.
During the course of the month of February the two Aulien Funds (Patrimonium and Global) will merge. The unified investment scheme will manage approx. 24 million EUR and will benefit from an increased diversification with allocation into alternative investments and also some real estate funds. The investment strategy will be more oriented to a fund of fund allocation with the bulk of its assets but will keep approx. 20% into Equity trading. We think there is a good potential of rebound on some stocks that have dramatically tumbled recently such as AMS, Stora Enso and Ali Baba. The timing of the merge in the midst of current market turmoil have risen questions on the possible crystallization of market losses but we feel that the Fund will still have a decent potential of rebound despite switching its conservative switch. A part of the 20 % Equity allocation, we will allocate another approx. 20% into long/short strategies that we feel could offer a better risk/return ratio with the current decline in visibil-ity.
We take this opportunity to thank all our investors for their trust and wish all of you a very happy, healthy and successful New Year 2019.