Industrial, technology and healthcare stocks now offer a good mix between yield and defensive characteristics. China is undergoing an intensive reform phase, moving from “the end of poverty” to “common prosperity”. This offers opportunities for investors, as the country is a long-term challenge. However, investors have quickly priced in the uncertainty surrounding the regulations.
This was evident from a roadshow organised by Rothschild & Co, which Investment Officer Belgium attended last Thursday. The managers on duty to explain were Yoann Ignatiew (pictured), the manager of R-Co Valor, and Anthony Bailly, the co-manager.
R-Co Valor is one of the most popular diversified and flexible multi-asset funds in Belgium. The fund is included in numerous Branch-23 contracts and is widely distributed. The fund celebrates its 27th anniversary this year and the investment philosophy has remained the same.
Ignatiew: “The four pillars of active management continue to be an international “carte blanche” approach, investment themes linked to global growth, strong convictions and an experienced management team. This has enabled us to achieve annual returns in excess of 11 per cent since inception. The investment process is characterised by a sustainable top-down approach, complemented by a fundamental sustainability analysis of stocks.
Assets under management currently amount to 3.8 billion, of which 1 billion is invested in Belgium. This is therefore an important market for the French managers.
Over the years, three other sub-funds have been created in addition to R-Co Valor:
- R-Co Valor Bond Opportunities, which invests in global equities;
- Ro-Co Valor Balanced, a more balanced defensive fund;
- R-Co Valor 4Change Global Equity, with a strong focus on ES
Strategy
Ignatiew began his presentation by pointing to the risks of the pandemic, which is still not stable but under control, with the vaccination campaign limiting disaster scenarios. “As earnings growth slows, excess cash is supporting the market.”
In the US, the normalisation of the labour market is a key indicator for the Fed. A strong economic recovery is creating inflationary pressure, which could last for some time.
In Europe, economic growth is accelerating, driven by the recovery plan. “Investors are regaining interest in this region, which was long maligned by international investors. The German elections could mark a turning point in European fiscal policy,” Bailly said.
China
Ignatiew sees selective opportunities in China. “The government there wants to move from poverty to prosperity for all, through an intensive reform phase. That will not happen without a struggle, but certain Chinese values are now becoming attractive. Moreover, 80 per cent of new jobs in China are created in the private sector, not in the public sector.”
Portfolio composition
In R-Co Valor, the flexible fund, the managers currently have a significant weighting in industrial stocks, which are responding to the strong global recovery. Ignatiew: “It is an internationally-oriented sector with high added value.”
The managers also see value in healthcare and biotechnology as a new era of technological innovation has begun.
Geographically, the US accounts for the largest weighting with 38.4 per cent of the portfolio, followed by Canada (18.8 per cent) and France (14.5 per cent).
Technology/internet accounts for 24.9 per cent of the portfolio and banking and insurance for 15.4 per cent. Completing the podium is Industrials, which accounts for 14.9 per cent of the portfolio.
Big positions are held in Morgan Stanley, Alphabet, Ivanhoe Mines, Facebook and Cap Gemini.
R-Co Valor 4Change Global Equity
Ignatiew: “We currently have 45 lines, with an average weighting of 3.1 percent each. 30.9 per cent is in the ten largest lines and 48.7 per cent of the values overlap with those of R-Co Valor. Important positions include Alstom, which is benefiting from the industrial revival in Europe, Alphabet, Tencent, Microsoft and BNP Paribas.”
Performance
R-Co Valor has the longest track record.
Since its inception in 1994, the annualised return has been 11.2 percent.
At 10 years 11.3 percent, at 3 years 10.3 and year to date until 31/8/2021 11.8 percent.
The management fee of the capitalisation class with the lowest fees is 0.95 per cent.
Also read the interview (in Dutch) with Quentin Piloy published on Investment Officer Belgium last May.