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Vector 2023 Annual Review

31 Dec 2023

Dear investors,

We are pleased to present the annual review of our funds’ performance for the year 2023. Throughout the past year, global inflation experienced a significant reduction, and economic growth surpassed initial expectations. The positive macro-economic trends prompted a shift towards increasingly dovish monetary policies, culminating in the anticipation of rate cuts by the Federal Reserve in the coming year. This soft-landing scenario contributed to remarkable gains in both stocks and bonds, with the global equity index achieving a double-digit increase.

While the overall market exhibited strong performance, emerging Asia faced challenges, trailing developed markets by approximately 15% in 2023. Notably, sectors such as communication services, consumer discretionary, and information technology, which experienced significant losses in 2022, rebounded impressively during the year. The resurgence of these sectors was largely attributed to the outstanding performance of industry giants like Apple, Microsoft, Meta, Nvidia, etc. whose phenomenal gains played a substantial role in their recovery. The success of giant caps was evident in the global equity index, with the overall weight of the top 10 companies increasing from 12.7% to 18.9% over the course of the year.

In the realm of factor investing, growth stocks emerged as the standout performer in 2023, boasting an impressive return of 28.7%, easily surpassing the broader market index. Contrastingly, other factors such as momentum (+7.2%), value (+8.0%), and low volatility (+5.8%) underperformed significantly. Within our selection model we divested from value and favoured blend and growth stocks in response to their valuations becoming much more attractive in 2022. However, within the growth and blend corner we always tend to select more conservative, stable growing companies, who were – relatively speaking – less in vogue during the year.

Vector Navigator achieved a commendable performance of 9.41% over the year. Meanwhile, Vector Flexible faced headwinds, experiencing a negative selection effect and significant hedging in upward markets, resulting in a more modest gain of 1.69%. Over the 2022–2023 period, which was characterized by a growth crash in 2022 followed by a boom in 2023, our selection model delivered a satisfactory return in line with the broad market. We are hopeful that our selection will do well in 2024 as market dynamics normalize. 

We appreciate your continued trust and support, and we remain committed to navigating the dynamic investment landscape to deliver value to our investors.

Best regards,

Werner, Thierry & Nils