Vector 2017 Annual Review
31 Dec 2017
The improved global economic outlook as well as the positive political backdrop helped equity linked assets reach new highs in 2017. While the North-Korean related tensions did leave their mark on investor sentiment during the summer months, the global stock markets regained their confidence and ended the year 8.9% higher in Euro terms nonetheless.
While this doesn’t seem like an ‘extraordinary’ return to European investors, one should take into account that the Euro appreciated significantly during the year. In local currency US equities were undoubtedly one of the best performing assets of 2017, gaining a staggering 21.2%. Moreover, this return was realized with a remarkably low volatility, showcasing no negative months during the year and an intra-year maximum drawdown of less than 3%! Fortunately this marked increase in the price came along with supporting macro-economic and consumer confidence data. The Senate’s approval of corporate tax cuts also did its part to boost the after-tax earnings of US companies - all-in-all keeping valuations ‘relatively’ in check.
Despite analysts’ consensus at the start of the year, European markets weren’t able to close the valuation gap with North American companies in 2017. While political risk failed to materialize within Germany, France and the Netherlands - where pro-European candidates remained in power - the Catalonian independence referendum, challenging Brexit negotiations and unfavorable translation rates of foreign revenues did hamper investor’s confidence and company earnings in the region. With Italian elections coming up next year, it remains to be seen whether European and American valuations will drift closer to one another or even further apart.
It is clear that Emerging Markets had the best run in 2017. Improving growth prospects together with Dollar weakness have been the most important tailwinds of their excellent performance streak.
We are quite pleased with our funds’ performance in 2017. Vector Navigator and Flexible received several awards (De Tijd/L’Echo) and nominations (Trends Fund Award, Scope Awards) during the year and both funds were able to end 2017 with very strong (out)performances.
Vector Navigator recorded a return of 15.11% in 2017, beating the MSCI World All Countries (NR in Euro) with a healthy margin of 6.22% and our peers by 6.60% - outperforming 94% of the competition during the year. This excellent performance allowed us to end the year with a five-star rating in Morningstar.
Vector Flexible was up 12.41% over the year, boasting a reward-to-volatility ratio of 2.37 - which is 74% better than the MSCI ACWI’s score on the metric. In addition Flexible managed to outperform its Morningstar Category with 7.18%, beating 92% of its peers. Flexible too ended the year with the highest possible Morningstar-rating.