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Vector 2015 Annual review

31 dec 2015

2015 has turned out to be quite a rollercoaster for equity investors. During the first quarter stock markets around the globe reached new highs as Mario Draghi announced a Quantitative Easing program to the tune of 1.5 trillion Euro. But the ever-increasing possibility of a Grexit and - in later stages - growing concerns about the state of the Chinese economy, completely reversed the bullish sentiment during the summer. October and November saw market confidence partially restored, as concerns over China briefly dissipated. In the end, even a bearish December could not stop the World Index (MSCI ACWI NR EUR) from ending the year with a decent profit of 8.76%.

Overall, our funds performed quite well in 2015. Vector Flexible was up 8.22% over the year, boasting a reward-to-volatility ratio of 0.79 - which is 58% better than the MSCI ACWI’s score on the metric. As frosting on the cake, Flexible managed to outperform its Morningstar Category with 6.14%, beating 89% of its peers. Given the recent volatile climate on the stock markets we decided, mid-December, to increase the futures-coverage of Vector Flexible to 40%. As a direct consequence the fund is holding up quite a bit better than most global indices during the difficult first weeks of January.

Vector Navigator on the other hand recorded a return of 12.03% in 2015, beating the MSCI World All Countries (NR in Euro) with a healthy 3.3%. When comparing to our peers we see that Navigator ended the year on a 3.2% outperformance, which implies that the fund managed to beat 81% of its competitors during the year. Over the long term, this outperformance has been very consistent, as we now have beaten our Morningstar category for the 7th year in a row, and for the 14th year in the funds’ 15 years of history.

Not surprisingly, this outperformance also holds when we compare ourselves to regional rather than global indices or competing funds. The graphs below show that – since the implementation of a refined version of our methodology 4 years ago – Navigator has beaten every respectable broad regional index in play. This includes the North-American equity markets, which massively outperformed their counterparts in Europe and elsewhere.

 

 

The data also illustrate just how bad Emerging Markets have fared over this period: the BRICS for instance delivered an annualized return of 2.6% (including dividends), while the “average” return worldwide (as measured by the MSCI ACWI) was an annualized 14.7%.

Since we typically allocate about 10% of our investments to Emerging Markets, we do hope that they will start making up some of that lost terrain in 2016. Thus far this January, our prayers have unfortunately not been answered, to say the least.

 

 

But notwithstanding this enduring drain on our investment results these past years, it has not kept us from outperforming the global indices ànd every major regional index. So the question remains: why invest in regional equity funds, if you can beat all regions with just one global fund?