Wednesday, September 28

The commitment to global small caps has worked well for us

Final assessment of 2021? What strategies have worked best for you?

Higher risk strategies have worked this year. Of variable income in general in the main European economies and the US, the stock markets have ended with returns between 15-20%, that is, it has paid to assume risk this year. It is true that some emerging regions or Spain have lagged further behind. And in the fixed income part the case is very similar. In riskier assets, such as high yield, returns have been good. And for the more defensive investors, short-term fixed income, investment grade are in negative territory and although changing their risk profile is not the right thing to do, we must try to be more flexible for next year. What has worked well for us in equities is the commitment to global small caps, we have been very focused on Europe and Asia for valuations and in the fixed income part the Sextant Bond Picking fund accumulates a yield of 5.5% this year, which is more than we expected at the beginning of the exercise.

– Looking ahead to 2022, where do you think we should put the focus on our investments?

We are going to maintain a continuity strategy in that sense. the idea is to continue betting on global small caps. We understand that the conditions that exist today in the economies are favorable for this type of company. We must not forget that small companies benefit from growth environments, which is our base scenario, and in fixed income we do recommend betting on very flexible strategies. The outlook is more limited than in 2021 in terms of returns, but with a flexible portfolio, reasonable returns can still be obtained.

Regarding fears, inflation is still present and that makes it necessary to bet on companies with the ability to set prices and pass on the increase in costs to their end customers and in smalls cpas funds we have been investing for a long time in companies that have a strong position. leadership in a niche market. We will NOT make major portfolio adjustments for 2022 because our market positioning is adequate for this part of the market.

– Regarding the regions, will Asia continue to be interesting?
Yes. We think that Asia has to start to be part of the clients’ charts in a structural way. Investors have invested in Asia in a tactical and short-term way, betting on recoveries, we are seeing that – as happened with the US, Asia has to be incorporated into all end-customer portfolios for three reasons: 1) Because it is the broadest market: today Asia represents 60% of listed companies, 2) It is the fastest growing market, in fact, 75% of IPOs are in Asia today and, 3 ) is the most inefficient market, it is the market with the least coverage by analysts, which offers greater opportunities for active management.

In addition, there is an improvement in the quality not only of the companies but also of the management teams and that encourages the attraction of investors to Asia, with which many companies that perhaps are forgotten but are big businesses with this improvement in quality, communication and Management teams will be attracted to investments and will have more adequate valuations. And finally, the issue of ratings. Asia is the region with the best ratings. If we look at the two-year earnings, Asia is the cheapest continent globally.

Perhaps the approach we take in Asia is somewhat different. As a particularity, we recommend investing in Japan, which is a country that is out of almost all indices and we have a focus on Asia in small and mid cap that we find very interesting.

– And china? Should we invest in China again in 2022? What are the factors that attract investors’ attention again?
We think so, China is a very attractive region with very interesting growth. It is true that the growth prospects with respect to 2021 have been reduced from 7.7% to 4.7% but it is still an interesting growth. We believe that China presents certain risk factors, certain challenges that make us be more cautious: clear, transparent and easy access to information for companies; Regulatory risks that are still there as China at a given moment changes the market conditions and finally, excessive competition. We understand the concept of excessive competition as that if a company becomes a market leader in Asia, it is normal that it only enjoys that position for 1-2 years, so when you bet on a company in the medium long term you realize that in China you cannot make long-term projections because new businesses are emerging that take away their competition, we have seen it with Alibaba and Pinduoduo when no one thought that Alibaba was going to lose market share.

– An investment idea from Amiral Gestion to win in 2022?
We bring two ideas: Sextant Asie, which is our Asian RV fund, we have already commented that Asia seems to us an interesting region due to the opportunities it presents and the approach we have with that approach to Japan and through small and mid caps we believe it can have very good results next year and also provide a very attractive de-correlation to portfolios.

In fixed income, the Sextant Bond Picking, we know that the returns in this segment are very limited, we are aware that in the fixed income universe it is not very attractive but having a fund in which you get a positive return is a good investment idea . You have to bet on a flexible portfolio, without limits and to look for investment opportunities wherever they arise.

– Returns and composition of the portfolio.

The Sextant Asie is a fund that we launched in April of this year, so we cannot speak of returns until it is one year old, but the performance is still quite good in relation to its benchmark. We maintain positive returns, it is a fund in which the data is being very good. In the geographical part we have 40% in Japan, 15% in China, 12% in Singapore… .There is an interesting decorrelation. And in the sectorial part there are two bets today: consumption and trends such as digitization – technology.

At Sextant Bond Picking we have a 5.5% return, in 2022 the prospects will probably be more limited but there is still a journey at the bottom. At the sector level we have a diversified portfolio, we do not have any sector above 10% by weight, we have food, consumption, industrial, technology … and geographical level it is more concentrated in France.

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