-
Focus
Fund Focus - BL Global Flexible EUR
Banque de Luxembourg Investments
BL Global Flexible EUR's investment strategy is based on a flexible long-term allocation, with capital allocation over four major asset classes that tend to have a negative correlation: Equities/Bonds/Gold/Cash.
However, the strategy is not based on market timing or short-term decisions.
*Note : Cumulative performance net of fees (B share) calculated as at 17.03.2022. Past performance is not a guide to the future returns. Source: Lipper.
YTD | Since Ukraine invasion (24.02.2022) | |
---|---|---|
BL Global Flexible EUR B Cap | -3.13% | 0.85% |
Lipper Global Mixed Asset EUR Bal - Global | -5.63% | -0.10% |
Both year-to-date and since the Russian invasion of Ukraine, the strategy has managed to outperform the universe of comparable funds.
In terms of the behavior of the different asset classes, we can highlight the following elements:
Overall, the market environment has deteriorated significantly in recent weeks, prompting the Investment team to adopt a more cautious positioning.
This caution is reflected in the integration of hedging (European and American index futures) in early March to reduce net exposure to equity risk.
The implementation of these hedges should enable the fund to better resist in downward phases; the counterpart being that the fund will benefit less from potential technical rebounds in the market.
BL – Global Flexible EUR | |
---|---|
Equities | |
Gross exposure | 73% |
Net exposure | 55% |
Fixed Income | 5% |
Gold-related stocks | 13% |
Cash | 9% |
Within the equity sleeve (excluding gold mining), investments fall into 3 broad categories (bearing in mind that this is a subjective classification and that some stocks could be included in several buckets):
Unless the situation escalates the impact of the war in Ukraine on the global economy is mainly through the rise in commodity prices. This increase, primarily in the cost of energy, is adding to inflationary pressures and is likely to keep inflation higher for longer.
In such a situation, the real incomes of households (and thus their purchasing power) as well as the profit margins of many companies (and thus their profits) fall, which has a negative impact on private consumption and investment, and thus on economic growth. The spectre of stagflation is therefore resurfacing, particularly in Europe.
The deterioration of the economic situation and the change in attitude of the central banks are naturally leading to a rebound in volatility on the financial markets and a rise in the risk premiums demanded by investors.
The outlook for equity markets has worsened in recent months. If investors demand a higher risk premium for investing in equities, either the risk-free rate will have to fall (however, as mentioned above, interest rates are currently trending upwards) or the expected return on equities will have to rise (which in principle means that valuation multiples will have to fall).
However, we continue to believe in equities, provided one is selective, adopts an appropriate investment horizon, adjust one’s return expectations and accepts higher volatility.