Monthly Update: January 2016
An upsurge in stock market volatility in the first weeks of 2016 has increased the anxiety level of many investors. Renewed turbulence on the Chinese markets, fear of a global economic slowdown and even the plummeting oil price, led to steep corrections in equity markets. With the late summer of 2015 in mind, we would not describe the current volatility outburst as exceptional. But the witnessed correlation between equity markets and the oil price is quite remarkable. That both are dependent on the health of the global economy is clear and uncontroversial and will lead, from time to time, to substantial and prolonged co-movement (2008 comes to mind). But saying that stocks are declining because of the collapsing oil price is a logical fallacy that we don't recall the name of (but it's related to this). If anything, economic logic dictates quite the opposite: a plentiful supply of cheap energy is good for the global economy, and good for stocks.
Our global equity fund Aphilion Q² - Equities shed 5.3% in one of the worst-ever starts of the year for global equity markets. There was a slight outperformance vs. the MSCI World index (euro) despite the continuation of very strong ETF inflows punishing active equity funds like our own. This last trend will eventually reverse (or at least its effects will) but it is of course impossible to predict exactly when. A good guess might be when the quantitative easing exercises of the past decade are behind us, but that's more speculation than reasoned opinion.
Aphilion Q² is an all equity UCITS , and is always 100% invested in a geographically (developed markets) and sectorally well diversified selection of +/- 80 stocks. Since its launch in 2001 an average yearly return of +7.2% has been achieved, significantly better than the global equity average and with a similar (not to say identical) risk profile.
The less volatile and thus more defensive subfund, Aphilion Q² - Balance, proved its value in January with a minor loss of 0.9%. Equity exposure of the fund stands at around 20%, so the downside was limited and the outperformance of the Q² selection helped to limit the damage. The aim and expectation here remains to have the equity exposure of Q² hedged by around 75-85% and to let the outperformance of our equity portfolio drive more or less absolute returns of 5% to 8% annually.
Last week, an interview "Meet the fund manager" appeared in the Belgian newspapers De Tijd (in Dutch...) and L'Echo (in French). More numbers and information can be found in our latest factsheets, available by clicking on the charts; or on our website for the Q² funds and www.aphilion.com/SIF for our offering to well informed investors only.
Thanks for your continued interest and confidence...