Bellevue Global Macro (Lux)

The Fund returned 4.0% in November with a volatility of 9.7%. During the month, the MSCI World Equity Index gained 6.8%, the JP Morgan Global Government Bond Index increased 0.3% and commodities lost 1.7%, all figures in euro hedged terms.

The main performance contributors were: non-government bonds 1.19%, government bonds 1.02%, equities 1.00% and foreign exchange 0.64%. Both risk-on and risk-off strategies contributed positively as financial markets went on anticipating more dovish central banks. Within non-government bonds, emerging markets outperformed. Government bonds gained thanks to the -44 bps yield compression in the US 10-year treasury to 3.61%. The equities strategy was supported by the dividend futures. The forex strategy, where we hold our foreign exchange hedges, benefited from the 5.05% loss of the USD vs EUR.

During November, we took some profits and lowered the equity exposure from 36% to 35% and the long-term government bonds from 46% to 38%. Non-government bonds increased from 25% to 26% mainly due to performance. We maintained the allocation as there is still significant value. The total portfolio duration was 3.2 years vs the long-term average of 3.8. The main hedges of the fund are the 38% US 7-year treasury position and the 4% gold exposure.

We modified our scenarios on November 16th as follows:

Scenario 1, weight 40%: US inflation confirms it has peaked, the Fed raises interest rates until December 2022, then signals a pause. A change in stance by the Fed would cause equity markets to rally. This is positive for equities and non-government bonds, neutral for government bonds, and negative for the USD.

Scenario 2, weight 40%: Inflation peaks but the Fed remains hawkish. We witness an economic recession in Europe and a strong economic slowdown in Asia. US economic growth slows down but remains positive. We think that an economic slowdown is largely, but not entirely discounted by the market correction that has already taken place. It is possible that markets will suffer a further down leg. This is slightly positive for equities and non-government bonds and slightly negative for government bonds.

Scenario 3, weight 20%: Persisting inflation, a steeper recession, global trade disruption due to the Ukraine conflict and US-China trade tensions precipitate a market correction. A global recession with inflation remaining elevated would limit central bank from acting decisively. Under this scenario, we would experience an equity market and a non-government bond correction. Government bonds, the USD and possibly gold would provide some limited shelter.