7/8/22 10:18 AM - Lesezeit

Equities: Time to bet on quality

Robert Karas

Chief Investment Officer

Do you love bitter cocktails? If so, you are the perfect investor for the first 6 months of the current year. High inflation, rising bond yields, war in Ukraine, unstable supply chains and economic slowdown in China were some of the ingredients blended within. Accordingly, the headwinds for mixed portfolios were fierce.

The rise in yields led to the sharpest decline in bond prices in at least 30 years - in the euro area as well as globally. While we were unable to escape this development, our positioning commenced conservatively into this difficult phase. At the beginning of the year, duration - a measure of average remaining maturity - was 3.4 years. In addition, we held a significant proportion of inflation-linked bonds. As a result, we reduced losses in this segment.

Investing with foresight pays off

The defensive positioning gave us, the Chief Investment Office, room for maneuver to additionally look for opportunities in bonds: on the one hand, in the context of attractive new issues and, on the other, by extending the maturity of the portfolio. We took advantage of the current higher interest rate level to benefit faster and more strongly from a recovery. As such, as soon as the current rise in yields slows down, profits are already possible in the form of higher current interest rates. Specifically, we initially increased the maturity in the bond-euro strategy to 3.7 years since the beginning of the year and then to 4 years in June. In our dollar bond strategy, we increased the duration to 4.5 years.

Focus on qualitative core values

After an initial risk reduction at the end of January, quality was the focus of all our further portfolio activities. This focus is placed on individual assets in which we are convinced of. 

For example, we sold the entire range of debt funds and the entire allocation in China. As a result, 90 % of the equity component consists of individual stocks that we have identified, analyzed and invested in ourselves. We are close to these business models and know the companies in detail. The remaining 10 % is made up of individual Japanese stocks. Here, an external team invests in a Gutmann fund shell. Therefore, we have access to every single stock and exchange information drilled down to the stock level.

Optimism as a sustainable investment strategy

Many of the global broad stock indices are at bear market levels. The symbol of the grim bear stands for price declines of more than 20 %. Such setbacks are always painful and individual stocks can lose far more than the average 20 %. The important thing here is that we are invested in business models that we understand and in those futures we believe in. These stocks are part of Gutmann's share portfolios.

Look to the future with optimism

No one can predict when this bear market will end, but the probability of positive stock returns over the next 12 months has increased dramatically. This assessment is based on the past bear markets and their recovery phases. There is, of course, no absolute certainty. Remember the 2008 financial crisis - an inglorious exception. Back then, investors had to wait even longer for a positive countermovement. 

If you are already invested, we continuously align your portfolio with the best opportunities. Only those who lose confidence in phases of painful setbacks and realize paper losses turn them into permanent capital losses. 
However, if you stay invested, you will also leave this valley behind and celebrate new highs in the future. To summarize, it has always paid to remain optimistic.

This is a marketing communication. Investments in financial instruments are exposed to market risks. Past performance or forecasts are not reliable indicators of future results. Tax treatment depends on each client's personal circumstances and may change in the future. Bank Gutmann AG hereby explicitly points out that this document is intended solely for personal use and for information only. Publishing, copying or transfer shall not be permitted without the consent of Bank Gutmann AG. The contents of this document have not been designed to meet the specific requirements of individual investors (desired return, tax situation, risk tolerance, etc.) but are of a general nature and reflect the current knowledge of the persons responsible for compiling the materials at the copy deadline. This document does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell securities. The required data for disclosure in accordance with Section 25 Media Act is available on the following website: https://www.gutmann.at/en/imprint

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