Comeback kid?

19 Aug 2022

Dear investors

While the old investment adage “sell in May and go away”, initially seemed to be spot on this year, stock markets rallied substantially in July, reversing most of 2022’s losses. The global equity index gained about 9.7% on a value weighted basis. Yet, on an equally weighted basis the index only increased by about five percentage points, which already hints at what kind of companies made a substantial comeback; you guessed it, the big ones!

Due to the growth boom of these past couple of years big companies are predominantly high growth companies, so all-in-all that was not a great development for a value focused investor. While growth stocks gained about 13%, value stocks had to make do with 6.6%. Our selection ended up somewhere in the middle, pretty close but slightly under the value-weighted benchmark.

Vector Navigator gained about 9.4% during the month, which is about 0.3% less than the global equity market but still 0.6% better than its peers. While we do allocate a substantial part to more growth-like sectors (i.e. technology) the names we selected within these sectors did not outperform due to the rotation away from growth at a reasonable price to deep-growth. Nevertheless, we are quite happy that we could keep up with the benchmark in a month where many of the traditional quant factors (momentum, value, volatility) took a big hit.

Vector Flexible recorded a return of 4.4% in July, outperforming the Morningstar category by 0.5% during the month. Flexible has had a very good run this year, outperforming its peers by more than 10% in 2022 and enjoying a year-to-date return that is positive (+2.31%). This month we decided to take our foot of the gas and slightly reduce the fund’s exposure to the equity markets. Currently, the fund hedges about 55% of equity risk through the use of equity futures and cash (up from 45% in June). We believe that the stock market currently incorporates quite positive scenario’s, which are not fully supported (yet) by economic figures. We deemed the recent run-up of the stock market as a good opportunity to increase our hedge at quite elevated market prices. Of course, we will keep monitoring the data to see if we will have to readjust this decision as news hits the markets in the weeks and months to come.

Best regards,

Werner, Thierry & Nils