Monthly management comment
The objective of the Company is to achieve for the Shareholders an optimum return by undertaking directly or indirectly investments while reducing investment risk through diversification.
The Sub-Fund will predominantly invest in a diversified portfolio of equities, government and corporate bonds, commodities (through financial derivative instruments), currencies, structured products and alternative investment products.The sub-Fund will allocate a significant portion of its equity allocation into international stocks.
Markets rebounded strongly in June after a sluggish May, some of them are now reaching all-time highs. Central banks, once again,contributed in renewing investor’s confidence with a dovish stance. Everyone now expects a rate cut from the Fed in July but recent strong employment and CPI figures will probably limit the scope of the cut to 25 basis points. We fear an overly complaisant financial community relying on an everlasting Fed put. The forthcoming rate cut will not necessarily be followed by further stimulus in the US and Europe negative yield structures are not good news per se. The Bund is currently trading at new record low levels, reflecting a poor industrial and manufacturing environment.
Recent weakening growth in China are showing that the trade war is hurting and overall commerce is facing various issues such as more tariffs and regulations.
Nevertheless, despite these clouds, the general cycle is still baring momentum and there are no signs of recession yet. The forthcoming earnings
season will once again provide essential elements on current business climate and readjust expectations accordingly.
Profit warnings from some blue chips such as BASF are making investors worry and we do not see the usual euphoria usually preceding a major market correction. A contrarian would probably remain bullish but we feel that some precautionary steps are needed in order topreserve this year’s gains and our client’s capital.
Aulien performed well in June up +2% and is +4% YTD.
We continue to hold a large part of the portfolio in Cash or very short maturities preferring a small negative yield than jeopardizing the capital in long duration or high yield with the current yield conditions. We expect some stress in Bond markets and strive to stay as liquid and safe as possible.
The Equity portion of the portfolio is performing well with some shares obtaining over performance such as Tomra +43.9% YTD / Hermes +30.8% YTD / and Elekta continuing its recovery (up +17.1% since purchase).
We’ll continue to focus on companies with good growth expectation even if in case of economical slow-down (Tomra) and with a particular edge. Recent trades include purchase of USD bonds (Anglo gold Ashanti) EUR note Eircom Finance and Netflix.
On the Equity side, we initiated a couple of new positions (Cibus Nordic real estate) and Leo Vegas (mobile gaming operator) while we have sold our position in Orpea (profit taking and some concerns on possible government involvement). We increased our stake in Hexagon after its profit warning as we felt it was a good opportunity in the long run.
Our currents favourite picks are Elekta, Leo Vegas and Cibus.