Yoann Ignatiew
General Partner, Head of International Equity and Diversified
As R-co Valor Balanced celebrates its 5th anniversary, the fund management team looks back at some of the highlights and shares its investment convictions.
How would you sum up the past 5 years?
Since its launch, the fund has had to deal with complex market environments. Over the last five years, the Investment Grade(1) corporate bond market has recorded three negative years, with the worst year being 2022, with a performance of -14%. Global equity markets fell by -13% in the same year(2). In this somewhat unstable environment, R-co Valor Balanced has managed to stand out with a performance of more than 14% since inception, while maintaining relatively moderate volatility of around 10% over 5 years(3).
What is the impact of the economic slowdown and rising interest rates on the allocation strategy?
ActThe fund is currently 58% exposed to fixed income, 33% to equities and 9% to money market instruments(3). The equity pocket is at its lowest level since inception, reflecting a cautions stance. Overall, we have repositioned the fund towards stocks with a more defensive profile, particularly in the healthcare and gold mining sectors. Within the fixed income pocket, Investment Grade bonds are favoured and represent around 87% of exposure to the asset class(3). The rise in interest rates over the last few months has provided us with a return of around 6%(2). In an end-of-monetary-tightening environment we will aim to gradually raise the portfolio’s sensitivity, while limiting the allocation’s credit risk mainly through 10-year Bunds. In the money market pocket, we are positioned on French government bonds with maturities of less than 1 year and yields close to 4%(2).
Is the current environment conducive to this type of investment solution?
As a diversified fund, R-co Valor Balanced benefits from some leeway to adapt its exposure to different market conditions, depending of the management team analysis. Currently, the portfolio is benefiting particularly from the renewed attractiveness of bond yields. The slowdown in global economic growth, the shrinking of the equity risk premium, and the reduction in liquidity orchestrated by the central banks, on top of tougher access to credit, are all factors that are making us more cautious. Nevertheless, we remain convinced of the potential of equities in a resilient macroeconomic environment in the United States, underpinned by household consumption, and considering the particularly attractive valuation levels in Europe. We are also maintaining our exposure to Chinese consumerism, as the savings accumulated in China since the Covid crisis have not yet been used up and offer interesting perspectives.
Associated file
Dowload file (PDF)
(1) Debt security issued by companies or governments rated between AAA and BBB- by Standard & Poor’s.
(2) Source: Bloomberg, 31/10/2023.
(3) Source : Rothschild & Co Asset Management, 31/10/2023. Share C EUR.
(4) Source: Rothschild & Co Asset Management, 31/10/2023.
(2) Source: Bloomberg, 31/10/2023.
(3) Source : Rothschild & Co Asset Management, 31/10/2023. Share C EUR.
(4) Source: Rothschild & Co Asset Management, 31/10/2023.
