About performance of ABLV open-end mutual funds in November

Riga, Latvia, December 6, 2012, 15:47 / Investments

In November, situation on financial markets matched our expectations. In our previous comment, we noted that high volatility is possible on the stock markets following presidential elections in the USA. We expected the correction to be of speculative nature and not lasting for long.

Further developments evidenced our expectations coming true, although it should be noted that the correction on the stock markets was little deeper than that anticipated by us, since some market players treated Obama winning the elections as potentially more negative scenario for solving the “fiscal cliff” problem. However, the global stock market, following a rather strong decline, managed to regain lost positions almost during a week, and therefore closed the month in positive territory, which is another evidence of speculative nature of the movement.

Manager of the stock funds kept to holding strategy, since overall market overview remains moderately positive in the medium term, due to considerable improvement in macroeconomic data and expected solving of fiscal cliff problem. There are several tactical actions taken within the main strategy in order to optimize the funds’ structure by decreasing share of some positions associated with high currency risk. First of all, this refers to the countries like Brazil and Japan, where actions of political and monetary authorities are aimed at decreasing the exchange rate of their local currencies against major world currencies.

The course of events in bond markets of emerging countries also followed our scenario, according to which further growth potential is supposed to be minor in the short term, given rapid rise of prices since the beginning of the year. Meanwhile, the risk of short-term correction has increased significantly, since the second half of November and the beginning of December are traditionally viewed as the time to take profit and close positions by most traders. Therefore, as at the end of November, ABLV bond funds included high share of cash, which was planned to be invested if correction occurs.

Further developments in the bond market in November confirmed our expectations. Negative trend observed in the stock market in the first half of the month made some pressure on other risky asset classes as well, which caused profit taking, especially in corporate bonds. The manager used this situation to restore some of the positions closed earlier.

In future, the cash component will continue to decline, and most attention will be paid to searching for undervalued securities and purchasing those at attractive price. We still do not expect the prices to rise rapidly till the end of the year, and therefore, in our opinion, we will have enough time to search for most attractive bonds.

The funds’ performance results as at 30 November 2012 can be found here.

General information on ABLV investment funds and management company ABLV Asset Management, as well as all additional information can be found on our home page.

The historic performance is no guarantee for the Fund’s future performance. This material is informative and it cannot be regarded as a proposal or recommendation to purchase or sell investment certificates mentioned herein.