Portfolio Managers Comment - March 2022 – Fixed Income – ARCIPELAGOS MAC AM CREDIT SELECT UCITS

01/04/2022 Commentaire de Gestion
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Portfolio Managers Comment - March 2022 – Fixed Income – ARCIPELAGOS MAC AM CREDIT SELECT UCITS

Our Fixed Income management based on the primary market generated a negative performance of 0.66 % in March, bringing the negative net performance of the fund to 0.06% over 1 year.

Investors were in fear in early March due to the intensified geopolitical tension between Russia and Ukraine followed by a series of sanctions. The sanctions include the expulsion of Russian banks from SWIFT and the ban of Russian gas and oil in the U.S., triggering the sell-off in both Bonds and the equity market. Gas and oil price spiked, oil was trading at a peak of USD130 / barrel. It further intensified the fear of inflation and recession in the global economy, causing another sell-off in securities in early March. Investors were seeking safe-havens. The dollar strengthened in March and was trading at 0.93 at its peak against EUR.

On 10/03, the ECB announced the tapering of the Asset Purchasing Program. The regular bond-buying will be cut to EUR 20bn in June. The deposit rate remains at -0.5%. The timing of the interest rate hike in the European area is still unknown. Some investors were expecting the ECB to support the market prior to the ECB meeting, but the ECB’s decision disappointed a lot of fixed-income fund managers.

Fed traders had fully priced in for 7 rate hikes with 25bps for each hike on 14th March. The FOMC announced a 25 bps increase in Fed Fund Rate on 16/03. The uncertainties in the market reduced, combining the progressing peace negotiation between Ukraine and Russia in mid-March, the market rallied, and investors gained confidence in the market for the time being. On 21st March, J. Powell mentioned there could be hikes of more than 25bps in the upcoming meetings if the FOMC deemed it necessary. The Fed has become more clear that they are willing to risk growth to fight inflation. Some analysts predicted that a recession is likely to occur in near future.

The Bank of England followed the FOMC on 17/03 and announced the third rate hike of 25bps. The interest rate is now 75bps. R. Sunak announced some tax cuts to relieve the cost of living in the U.K. after the rate hike in the U.K, but being criticised the tax policies will worsen the living standard.

The market has become unstable in February under hate hikes and the Russian-Ukrainian war, we decreased the size of High Yield bonds to reduce the exposure to the rate hike and the market volatility. We also evaluated the very limited exposures we had in the portfolio. We prefer cutting bonds that have operations in both countries to reduce the volatility reflected in the NAV performance.

We have cash now to invest in the upcoming primary market. We are attentive to the new opportunities that will be issued in the market.

Benefit from this strategy

Our strategy is to take the premium in the new bond issuances and hold positions on bonds that have good potential. The strategy analyses the macroeconomic environment, identifies, and adjudicates market opportunities in the primary market intending to generate absolute performance uncorrelated to the markets.

To benefit from this strategy in your investments, please subscribe to our UCITS1 Fund started on January 04, 2021.

EUR Share Class : LU2095273590

USD Share Class : LU2131342482

For more information, do not hesitate to visit the dedicated page or to contact us directly.

P: +44 (0)20 3750 9971

M: info@mac-am.co.uk