Strategy overview
BL Global Flexible EUR is a flexible asset allocation fund that aims to generate an attractive return over the medium term.
The Fund invests in asset classes that are often inversely correlated, each having a specific role to play in the portfolio depending on the market context:
- Equities are the main long-term driver of returns;
- Bonds: A factor of stability during periods of turbulence on the stock markets;
- Gold (via gold-mining stocks): Protection against macro/geopolitical/systemic risks;
- Cash serves as a reserve to invest when opportunities arise.
Finally, BL Global Flexible EUR is a fund classified as Article 8 according to the SFDR regulation. It integrates ESG factors into different stages of its investment process and is committed to investing a minimum of 20% of its assets in assets that are considered sustainable (according to BLI's internal methodology).
The Fund also benefits from the “Label ISR” (France) attesting to the solidity of the SRI approach implemented.
Recent positioning and movements
The Fund Manager has not made any significant changes to the asset allocation since the beginning of the year. The equity allocation remained stable, hovering around 70%. The Fund Manager maintained an equity hedge of 25% -24% through the sale of futures on the S & P Euro500, Stoxx 50 and SMI indices. The weighting of the bond portion was slightly increased as a result of the rise in rates in February and May, from 10% to nearly 13%. The gold weighting remained stable at around 14%.
In terms of regional allocation of the equity pocket, the Fund Manager maintains a significant exposure to Asian markets, whether Japan or emerging Asia. In particular, Japan should benefit from a structural trend towards better allocation of capital and improved profitability of Japanese companies. Conversely, US market weight remains well below the MSCI World Index.
Year to date holdings in Adobe, Alphabet, Mastercard, Christian Hansen, Bridgestone, Adidas and Travelsky exited the portfolio and seven new stocks were added to the portfolio: Canadian National Railway, Edwards Lifesciences (Healthcare), Equifax (Credit Software), Nomura Research Institute (consulting), Pembina Pipeline (Energy Transportation), ASML (Semiconductor Supplier), Tokyo Electron (Semiconductor Production Equipment Fabricants).
In the gold pocket, royalty companies were increased at the expense of producers.
Performance:
Note: Performance data net of fees (share class B) in EUR. Past performance is not a guide to future performance. References to a market index or peer group are made for comparison purposes only; the market index is not mentioned in the investment policy of the sub fund.
Source: BLI/Lipper. Data as of 31 May 2023.
| Since 31/12/2022 | 3 months | 1 year | 3 years | 5 years | |
|---|---|---|---|---|---|
| Fonds | 3,3% | 4,1% | -1,6% | 5,6% | 23,1% |
| Lipper Global Mixed Asset EUR Balanced | 3,2% | 0,8% | -2,1% | 6,6% | 4,9% |
Since the beginning of the year, the Fund has posted a performance in line with its peer group posting positive performances each month except in February which turned out to be more complicated as a result of the rise in bond yields, which negatively impacted bonds and gold. On the other hand, the lack of exposure to banking stocks meant that the Fund was not affected by the problems in the banking sector that arose in March.
Overall, the equity positions in the portfolio contributed positively to the Fund's performance, particularly European and Japanese stocks.
Equity hedging strategies weighed on performance in an overall rising equity market environment despite palpable fears of an economic recession in the coming months. Given BLI's macro scenario of a likely recession, the Fund Manager maintains this cautious view.
Outlook:
The impact of monetary tightening initiated by central banks in March last year is becoming increasingly visible. The slowdown is therefore likely to continue and a recession seems possible in the second half of the year or early 2024. If that were the case, there was a risk that stock markets could see a second earnings related downtrend, whereas last year's earnings downtrend was driven by multiple contraction.
Unless large cap tech stocks regain market leadership, US market outperformance looks behind us. Such a leadership recovery would require a return to the environment that had characterised the 2009's to 2021's, marked by moderate growth, stable inflation and ever lower interest rates. The possibility of a new structural environment emerging, with higher inflation leading to higher nominal growth, will have positive implications for other markets, particularly Asian markets.
Government bonds should continue to benefit from the economic slowdown and lower inflation in 2023, although longer term rates are already pricing in weaker economic activity and the end of central bank tightening. Their long-term prospects, on the other hand, appear poor, given the financing needs of governments and the risk of higher inflation in the long term.
Gold continues to be well positioned in a diversified portfolio, particularly given the possibility that central banks may sooner than expected exit from monetary tightening. An investment in gold should, however, be viewed as insurance and not as a short term investment.