Nasdaq DW Global Momentum Q2 2022 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||Systematic investing based on stocks’ relative strength|
|Quarterly return||-18% (net of fees)|
|Annualised volatility (since inception)||21%|
Among the key themes affecting the global equity markets in the second quarter of 2022 was the continued fallout from Russia’s invasion of Ukraine, aggressive monetary tightening by many central banks, including central banks of the United States, Switzerland, the UK and others, and persistently high inflation in many parts of the world. These themes combined to create a challenging environment for global equities in the second quarter.
The Nasdaq Global Momentum portfolio finished the quarter with approximately 70 percent of the portfolio allocated to developed international markets and 30 percent allocated to emerging markets. The percentage of the portfolio allocated to emerging markets increased slightly over the quarter. China has been one of the worst performing international markets over the last couple of years, but it was among the best performers in the second quarter. It takes some time for securities to move from having weak relative strength to strong, but that is an area that is being observed and could have positive implications if sustained strength is noticed in China. From a regional perspective, about 54 percent of the strategy is allocated to Europe, 13 percent to Asia and 13 percent to Latin America, with the remainder spread across the Middle East, Emerging Europe, Africa and the Pacific.
From a sector perspective, sectors which current make up the largest portion of the portfolio include Financials, Basic Material, Energy and Consumer Staples, while Technology and Utilities currently have relatively small weights in the portfolio.
Portfolio performance (net of fees)
Top 10 portfolio holdings (as of 30/06/22)
|LVMH Moet Hennessy Louis Vuitton||4.12%|
|Tata Motors Limited||3.89%|
|Novo Nordisk A/S||3.69%|
|ICICI Bank Limited||3.41%|
Best-performing positions (note that the performance shown for the quarter reflects the performance of the security during the part of the quarter Nasdaq owned it, not necessarily the performance of the security itself for the full quarter)
- (+0.09%) British American Tobacco p.l.c. provides tobacco and nicotine products to consumers worldwide. British American Tobacco p.l.c. was incorporated in 1902 and is headquartered in London, the United Kingdom.
- (+0.34%) Novo Nordisk A/S, a healthcare company, engages in the research, development, manufacture and marketing of pharmaceutical products worldwide. The company was founded in 1923 and is headquartered in Bagsvaerd, Denmark.
- (-0.78%) KT Corporation provides integrated telecommunications and platform services in Korea and internationally. KT Corporation was founded in 1981 and is headquartered in Seongnam, South Korea.
- (-1.44%) ING Groep N.V., a financial institution, provides various banking products and services in the Netherlands, Belgium, Germany, Poland, Rest of Europe, North America, Latin America, Asia and Australia. ING Groep N.V. was founded in 1762 and is headquartered in Amsterdam, the Netherlands.
- (-2.14%) BNP Paribas SA provides a range of banking and financial services in Europe, North America, Asia Pacific and internationally. BNP Paribas SA was founded in 1822 and is headquartered in Paris, France.
Worst-performing positions (note that the performance shown for the quarter reflects the performance of the security during the part of the quarter Nasdaq owned it, not necessarily the performance of the security itself for the full quarter)
- (-38.49%) Danaos Corporation, together with its subsidiaries, owns and operates container ships in Australia, Asia, Europe and the United States. Danaos Corporation was founded in 1963 and is based in Piraeus, Greece.
- (-60.57%) Bicycle Therapeutics plc, a clinical-stage biopharmaceutical company, develops a class of medicines for diseases that are underserved by existing therapeutics. Bicycle Therapeutics plc was incorporated in 2009 and is headquartered in Cambridge, UK.
- (-29.40%) ArcelorMittal S.A., together with its subsidiaries, operates as integrated steel and mining companies in Europe, North and South America, Asia and Africa. ArcelorMittal S.A. was founded in 1976 and is headquartered in Luxembourg City, Luxembourg.
- (-43.54%) Controladora Vuela Compañía de Aviación, S.A.B. de C.V., through its subsidiaries, Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V., provides air transportation services for passengers, cargo and mail in Mexico and internationally. Controladora Vuela Compañía de Aviación, S.A.B. de C.V. was incorporated in 2005 and is headquartered in Mexico City, Mexico.
- (-20.94%) Ternium S.A. manufactures, processes and sells various steel products in Mexico, Argentina, Paraguay, Chile, Bolivia, Uruguay, Brazil, the United States, Colombia, Guatemala, Costa Rica, Honduras, El Salvador and Nicaragua. The company was founded in 1961 and is based in Luxembourg City, Luxembourg.
Historically, market declines of the magnitude observed so far in 2022 have often led to favourable investment opportunities and they are likely going to lead to the same outcomes this time as well. Some of the headwinds, such as high inflation, ongoing supply chain challenges and the underperformance of China have the potential to improve as we move into the second half of the year.