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The Crystal Funds of 2022
For the second year in a row, the Value Square Fund - Equity Belgium C Cap wins the Crystal Fund in the Belgian equity fund category. The Brussels Stock Exchange is a small market, but it has assets. It has many small caps and is therefore potentially interesting in a portfolio as diversification.
Foreword: Dealing with risk and uncertainty
It is a real challenge in these times to present awards for the best performing funds of the past year. The end of the lockdown in late 2021 was a prerequisite for the economy's recovery. But analysts adjusted their growth forecasts downward when a new wave of contagion emerged. Portfolios were then switched from growth stocks to value stocks. But Russia's invasion of Ukraine in February was a gamechanger. The rise in energy prices came on top of the rise in commodity prices. There were also bottlenecks in supply chains in a fairly tight labor market. From then on, there was no temporary inflation.
Inflation, rising interest rates and falling markets are factors that fund managers faced between July 1, 2021 and June 30, 2022. While winning equity funds were able to keep themselves straight with positive returns during this period, bond funds were in the red. These categories reward the funds that were able to limit the damage. A year ago, optimism prevailed among fund managers. Today there is recession, inflation that has not yet peaked and more interest rate hikes by central banks. The economic and financial environment for managers will remain challenging in the coming months. It is now growth and inflation expectations that are driving the markets. In such an environment, managers can only build scenarios with different scenarios and hope they make the right choices.
Classification and methodology
La Libre and De Standaard's Crystal Funds are awarded in the fall based on one year's performance as of June 30. In the current context and due to uncertain geopolitical conditions, inflation and rising interest rates, it seems increasingly difficult to choose among the very (too?) large number of financial products on the market. Investors still too often rely solely on fund performance. Today, La Libre and De Standaard are presenting awards based on returns between July 1, 2021 and June 30, 2022.
This award highlights the best funds in each category based on their performance. These Crystal Funds focus on ten categories of funds: beveks investing in Belgian equities, beveks investing in global equities, European equities, U.S. equities, small & mid caps, beveks in corporate bonds and beveks in government bonds. This is followed by the three awards for defensive, neutral and dynamic patrimonial investment funds.
The rankings are prepared by the company Symex and under its responsibility. They are provided for informational purposes only. The editors of La libre and Le Standaard chose a simple methodology. The funds are ranked within each category according to their -clean" performance, without taking into account their volatility.
This performance is calculated based on the one-year performance from July 1, 2021 to June 30, 2022, which is weighted at 75%. In addition to this performance, the three-year performance evolution is weighted at 25%. Only funds offered to the general public (retail) in Belgium with no minimum entry fee can be included in this ranking. For each nominated and winning fund, this was confirmed by the fund publishers. This is the responsibility of the authors and not of the editors of the two publications.
Remember that wealth management is not a sprint, but a marathon that must be evaluated over time and the long term.
However, we must not forget that return should not be the only criterion to be considered when choosing a mutual fund. Past performance does not guarantee future results. This cannot be repeated enough! Therefore, these rankings are published for informational purposes only. Under no circumstances should these awards and nominations be considered investment advice.
Remember that wealth management is not a sprint but a marathon that must be evaluated over time and the long term. Investment horizon and objectives must be taken into account. Before investing, it is always advisable to obtain information and review the KIID (key investor information document), which is specific to each fund and informs the investor about the fund's level of risk, expenses, investment universe and performance. Documents with information to supplement this award presentation.
Isabelle De Laminne
The winners speak: Patrick Millecam (Partner - Senior Portfolio Manager)
What factors explain your fund's good performance during this period?
The Belgian market is indeed rather a market of small and medium-sized companies. We have screened the portfolio to see if each company is reasonably armed against the challenges that affect all companies (strong cost increases due to inflation of many raw materials, rising energy prices, component shortages, tight labor market, the automatic wage indexation in Belgium). We paid particular attention to pricing power in portfolio composition to prefer those companies with strong pricing power. We also had a relatively large cash position at the beginning of 2022, so we were less affected by the correction in equity markets.
The portfolio stocks that produced the strongest returns over the period July 2021 - June 2022 are Aliaxis (+54.2%), Euronav (+51.3%), Van de Velde (+45.2%), Resilux (bid, +40.4%), D'Ieteren (+38.7%), Sipef (+37.9%) and EVS (+31.2%). Of all Belgian equity funds, we have the lowest percentage of Bel20 equities. We therefore have the highest "active share" of all funds that have been in existence for at least 5 years. We are fairly benchmark agnostic. We choose those stocks with the best risk-adjusted upside potential.
The potential of Belgian equities
For the second year in a row, the Value Square Fund - Equity Belgium C Cap wins the Crystal Fund in the Belgian equity fund category. The Brussels Stock Exchange is a small market, but it has assets. It has many small caps and is therefore potentially interesting in a portfolio as diversification.
"The Belgian market is indeed a market of SMEs. There are only 107 Belgian companies with a market capitalization of more than 25 million euros. If we use Euronext definitions, there are 42 mid caps on Euronext Brussels and 22 small caps. In other words, 60% of the number of Belgian listed companies (with a market value of at least 25 million euros) are small and mid caps. Large caps, above a billion euros, represent 40% of the number of companies, but 93% of the total market capitalization," acknowledges Patrick Millecam, manager of the Value Square Fund - Equity Belgium.
In this context, how do you manage a fund in such a small market? The manager admits that he makes his picks outside the Bel 20 index through active management and pure stock picking. Each company is then screened. In a context of high inflation, the main thing is to pick out the companies with strong pricing power, i.e. companies that can pass on increases in costs, energy or raw materials in their selling prices. In certain market situations, it is also good to keep cash behind in order to respond to opportunities.
But what can be the added value of such a fund compared to broader funds investing in European or global equities?'The added value for clients and shareholders of Value Square and Equity Belgium lies in the strong monitoring of all Belgian shares. Value Square conducts a major study every year into the fundamental value creation of all Belgian listed companies. We therefore believe that clients are entitled to really active management and good performance," adds Patrick Millecam. This market, considered in isolation, is discrete, but does have some gems. For Belgian investors, certain listed companies are sometimes linked to personal experiences. By investing in such companies, you can claim to be a co-owner.
'Listed companies have a relatively stronger media presence than unlisted companies. So you can follow these companies better, you can taste their products or use their products and services. Invest in what you know is a well-known stock market wisdom. It also gives you more peace of mind. This is an important element for an investor to avoid panic buying and selling at the wrong time. This allows him to get better returns in the long run. And besides, few companies depend solely on the Belgian economy. With a Belgian equity fund, you can also benefit from economic developments in the rest of the world (Europe, the US and Asia), "says Patrick Millecam. It is true that Belgium is a small country looking at the world. Our small equity market therefore has a number of advantages that the winner in the category of funds invested in this market has been able to take advantage of.
Isabelle de Laminne
Disclaimer
This article was written at the initiative of De Standaard and was not sponsored by Value Square; it was reproduced in full.
- EN: The Standard
- FR: La Libre
- ENG: Business Update
