FUND REPORTING
Eduardo Mollo Cunha

FUND REPORTING, as of 31.12.2019

The markets ignored the worries of 2018

The stock markets crashed worldwide during the fall 2018. On January 3, 2019, the tide turned, the markets decided to ignore the fears and worries of the previous year and said to everyone and everything: No worries.

The equity markets rose on average by 30% in €.

It is particularly gratifying that European stocks were able to keep up. Japan and the emerging markets, on the other hand, struggled. But bonds also went well in the course of global financial easing. What is striking is a "barbell structure", i.e. the performance of high yield and government bonds was better than that of IG rated corporate bonds. Even gold and oil had a good year. This development is surprising since the list of potential stress factors has not really become shorter. The dreaded global recession has failed to materialize. However, secular stagnation still has a firm grip on us. We owe that things did not get any worse thanks to the FED's forward-looking policy, which switched to easing mode at the right time. The economic headwind should still not be underestimated: the weakening effects of the tax reform in the USA, the increasing political uncertainty and the smoldering trade conflict with China, but also with the EU, are slowing investment and growth. The good news is that it won't get any worse. 

The pressure on profit and revenues development for most companies is decreasing. Nevertheless, share prices have already anticipated much of the expected “brightening” and the transfer of the “baton” from expansionary monetary to fiscal policy. Therefore disappointments will not be absent. The right mix will decide on the further success of the investment, generating growth on the one hand and stable income on the other. With our already storm-tested “Schumpeter” equity strategy and the focus on crossover bonds between investment and non-investment grade, we feel adequately invested.

The fund gained between + 1.42% and + 1.57% depending on the share class. The largest contribution came again from the equity portfolio, especially from Alibaba, Bayer, JD.Com and Shopify. However, there were price losses at Checkpoint. Subordinated bonds, issuers from the commodities sector and Teva were particularly impressive in the bond portfolio. We mainly invested cash inflows in technology and healthcare stocks and real estate and commodity bonds. The equity exposure remains at 55% of the portfolio and we plan to keep it so.

  Phaidros Funds Balanced Morningstar Peer Group*
  Return Volatility Return Volatility
10yrs ann. 6,9 7,0 2,3 5,7
5yrs ann. 7,4 8,0 2,1 6,3
3yrs ann. 7,9 6,4 2,1 5,5
1yr 20,0 6,3 11,6 5,4
YTD 20,0   11,6  

* Morningstar category EUR Flexible Allocation Global

The fund gained between + 1.17% and + 1.20%, depending on the share class. The largest contribution came from the equity portfolio, in which the TeamViewer-ipo, Adobe, Bayer and the emerging markets ETF. There were losses at Square and Walt Disney. Subordinated bonds and issuers from the commodities sector were particularly noteworthy in the bond portfolio. The addition of the gold mine ETF also had a positive impact. We sold Nokia in the equity portfolio. The company is benefiting from the trend towards 5G and the skepticism towards Huawei, but is not quite “technologically up to date” and has unsettled investors with a profit warning. We have strengthened ourselves with Medtronic and Johnson & Johnson. We have thus reduced our cash exposure to less than 5% and we plan to keep it so.

  Phaidros Funds Conservative Morningstar Peer Group*
  Return Volatility Return Volatility
10yrs ann. - - 2,3 3,4
5yrs ann. 4,4 5,1 1,5 3,4
3yrs ann. 5,0 4,1 1,3 2,7
1yr 13,5 3,9 6,7 2,6
YTD 13,5   6,7  

* Morningstar category EUR Cautious Allocation

The fund gained between + 0.90% and + 1.04% depending on the share class. The largest positive contribution came from subordinated bonds and issuers from the commodities sector. We used cash inflows for the increase in existing positions (VW, Peach Property, Belden, Fortune Star) and for some new commitments (Ageas, Atlantia, TAP). However, we still have around 7% cash exposure for further purchases. Consumer stocks continue to make up the largest sector exposure at 30%, followed by financial and telecoms stocks at 19% and 14%, respectively. We expect issuing activity to pick up in January and will look for opportunities.

  Phaidros Funds Fallen Angels Morningstar Peer Group*
  Return Volatility Return Volatility
5yrs ann. 3,9 2,7 2,9 4,2
3yrs ann. 4,1 2,2 2,7 3,3
1yr 10,4 2,2 9,4 3,6
YTD 10,4   9,4  

* Morningstar category Global High Yield Bond (EUR Hgd)

The fund gained between + 1.13% and + 1.23% depending on the share class. The biggest positive contributors to performance came from Alibaba, Amazon, Apple, JD.Com, Shopify and Bayer. Checkpoint and Square and disappointing news from Henkel and Unilever had a negative impact. We have invested a large amount of cash inflows in existing positions; our cash exposure is currently 7%. The weighting of monopolists is just under 2/3 of the portfolio. 23% are challengers. Our focus remains on the technology and healthcare sectors, which together represent more than 50% of the portfolio. We want to stick to our current asset allocation.

  Phaidros Funds Schumpeter Aktien Morningstar Peer Group*
  Return Volatility Return Volatility
5yrs ann. - - 8,1 11,8
3yrs ann. - - 8,0 10,3
1yr 29,0 7,8 26,0 10,5
YTD 29,0   26,0  

* Morningstar category Global Large-Cap Blend Equity

Source: Morningstar, as of 31.12.2019 | Calculation based on month-end prices. The stated performance is the calculated net asset value in % in the fund currency after costs and without taking any subscription fees into account. The data are historical data and do not guarantee future developments.