After an unfortunate 2022 for the vast majority of financial assets, in this first half of the year, funds have provided positive returns to our participants. This makes us face the coming months with confidence to continue looking for new opportunities of investment and continue reaping the fruits of our strategic bets.
The profitability during the first half of 2023 has been 6.38% for Loreto Premium Global F.I., 7.98% for Loreto Premium Mixed Equity Income F.I., 3.83% for Loreto fund Premium Mixed Fixed Income F.I. and 0.29% for Loreto Short Term Fixed Income, F.I. since it’s launch in March. This new short-term fixed income fund complements our range of funds to meet the demand of our participants, for a product that offers an alternative to the low profitability of deposits, and does so in the year in which our entity Loreto Inversiones turns 5 years old.
This first semester has ended positively for most financial assets. Economic resilience, thanks to the strength of the services sector, has compensated the weakness in manufacturing, falling inflation, robust employment data that continues to support the consumer and business results that have been better than expected, may have been some of the factors behind this behaviour.
In this period, the main indices ended with positive returns. The Eurostoxx 50 rose 16.0%, the S&P 500 15.9% and the Ibex 35 16.6%. The European index gained much of that profitability in the first weeks of the year, benefited by the optimism after the reopening of the Chinese economy and the devaluation of the dollar. The American index has overcome a weak start in the year, thanks to the emergence of the issue linked to artificial intelligence, which has benefited the main technological companies.
Although at first glance we have enjoyed a good semester, there have been moments of strong risk aversion as is the “norm” in the financial market. Serves as an example the banking crisis started by the American bank SVB (Silicon Valley Bank) that ended dragging down Credit Suisse in Europe, finally rescued by UBS. Also, the fear about the outcome of the debt ceiling negotiations in the US or the worries of default of the first economy on the planet.
Regarding the Central Banks, the Federal Reserve raised interest rates by 75 basic points (bp) during the semester, while the ECB did so at 150 bp. If the United States are closer to the end of the cycle of interest rate increases, in Europe the resistence of Inflation and wage increases suggest that the rises will continue.
The drainage of liquidity by the monetary authorities, together with the tightening so aggressive of the financing conditions, can take their toll on some of the sectors and more indebted companies, although the economies register fewer imbalances than in previous eras. The economic desynchronization between the main economies, the monetary desynchronization and the different levels of inflation or disinflation in the world, will continue to give us opportunities due to the great dispersion that is occurring between assets and sectors.
Economic growth is very uneven in different geographical areas: United States slowing down, but delaying the much anticipated recession till the next year; Europe, with a very anemic growth and, finally, China, will be one of the economies with greater growth this year, although more inclined to the final part of 2023 and 2024. In the equity income part, we see sideways markets since April, with a significant dispersion between sectors. Our strategy focuses on stock market selective purchases, maintaining significant levels of liquidity. Macroeconomic data, publication of results, business margins and above all, the visibility of companies, should guide us about the appropriate time to increase risk.
Regarding fixed income, we believe that we have already seen the peak of inflation and that the end of the increases by Central Banks, so we are positive on the asset. With this constructive long-term vision, we have been increasing the duration of the portfolios, mainly through government debt and taking advantage of moments of volatility in market via perpetual corporate debt. The fall in the price of energy and its extension to the rest of the components of inflation, should be the main catalyst to continue reducing inflation levels, both general and underlying, which is showing more catchy.
Loreto Premium Global, F.I. (investment fund registered in the CNMV with a risk level 3, in a scale from 1 to 7). In the last exercises, the class R of the fund presents the following annual returns: 2019: 4.58%, 2020: 3.28%, 2021: 5.86%, 2022: -7.64%
Loreto Premium Mixed Equity Income, F.I. (investment fund registered in the CNMV with a level of risk 4, on a scale of 1 to 7). In the last exercises, class R presents the following annual returns: 2019: 8.68%, 2020: 0.08%, 2021: 7.44%, 2022: -8.74%.
Loreto Premium Mixed Fixed Income, F.I. (investment fund registered in the CNMV with risk level 3, on a scale of 1 to 7). In recent years, class R presents the following annual returns: 2019: 2.57%, 2020: 0.22%, 2021: 2.60%, 2022: -6.71%.
Source: Own elaboration and Inverco. Past returns are not indicative of future results. Current expenses are already included in the profitability calculation. See the documentation legal, the advantages and risks of investment funds at www.loretoinversiones.com
Loreto Inversiones SGIIC SAU is an entity 100% owned by Loreto Mutua MPS.
July 2023
INVESTMENT DEPARTMENT
LORETO INVERSIONES SGIIC SAU.
LORETO MUTUA GROUP.
