Vector 2022 Semi-Annual Review

14 Juli 2022

Dear investors,

Developed market equities had a difficult first half of the year, in fact, the worst in over half a century of stock market history. Rising inflation, interest rate increases by central bankers and concerns about growth prospects all contributed to declining equity valuations. While the double-digit losses of global equity were partially offset by the appreciation of the US Dollar, global equity still ended the first half of the year 13.5% lower in Euro-terms.

This sharp appreciation of the USD somewhat masked the fact that the United States (-14.4%) was the worst performing broad region in local currency. The technology sector, which is disproportionally located in the States, did little to help the region’s performance as the sector suffered severely from the steady increase in interest rates. Globally, growth (-21.6%) and Momentum (-17.4%) – two styles that tended to invest heavily in technology stocks – are also down significantly. Yet, despite the significant underperformance of growth stocks, the valuations in this segment of the market still remain rather elevated.

Europe (-13.8%), which was definitely not helped by FX-effects so far, had a similar decline as the USA during the year. Emerging markets (-10.4%) had a mixed run: while the region suffered severely during the first quarter as China – a heavyweight within the index - imposed heavy restrictions that affected economic activity, it held up surprisingly well during the second quarter of the year. The biggest winners of 2022 thus far are value-minded (i.e., basic resources), or safer (i.e., utilities) sectors: value stocks lost only 4.6% and low volatility stocks did even better, ending the first half of the year on a loss of just 1%.

Both Vector Navigator (-5.4%) as Vector Flexible (-2.0%) have had strong relative performance during the first half of the year. While our flagship fund, Navigator, has outperformed its Morningstar category by 6.1%, our flexible allocation fund did even better as it outperformed the competition by 9.5% so far. Both funds are proving quite resilient against the market downturn. We hope this strong relative performance can continue during the second half of 2022.

Best regards,

Werner, Thierry & Nils