Nasdaq DW Global Momentum Q4 2022 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||Systematic investing based on stocks’ relative strength|
|Quarterly return||8.67% (net of fees)|
|Annualised volatility (since inception)||23%|
Global equity markets rebounded in Q4 after declining for much of 2022 against the backdrop of aggressive tightening monetary policy by many central banks around the world. There have been signs of moderating inflation in the fourth quarter, which may create the opportunity for central banks to take a less hawkish approach to interest rate policy in the coming months. This would be a welcome development and may lead to a more favourable environment for equities in the upcoming year.
From a sector perspective, the exposures are currently allocated as follows: financials (25%), healthcare (13%) and consumer cyclicals (11%). Sectors where there is currently the least exposure include utilities (4%), telecom (5%) and energy (6%).
From a country perspective, the largest exposures are currently allocated to the UK (13%), India (13%), Brazil (9%), Denmark (8%) and the Netherlands (8%). A noteworthy underweight continues to be China due to its weak relative strength, although there have been some signs of improvement in that country as well.
Regional exposure is currently tilted towards Europe (47%) and Latin America (26%). This strategy is not constrained geographically so the exposure will change over time depending on where strength is observed. Also, about 60 percent of the portfolio is currently allocated to developed markets and 40 percent to emerging markets.
Portfolio performance (net of fees)
Top 10 portfolio holdings (as of 31 December 2022
|Mitsubishi UFJ Financial||3.03%|
Best performing positions (note that the position may not have been held for the full quarter, but performance shown for the security is for the full quarter)
- (+48.22%) Mitsubishi UFJ Financial Group, Inc. operates as the bank holding company for MUFG Bank, Ltd. that provides various financial services in Japan, the United States, Europe, Asia/Oceania and internationally. Mitsubishi UFJ Financial Group, Inc. was founded in 1880 and is headquartered in Tokyo, Japan.
- (+37.47%) Tenaris S.A., together with its subsidiaries, produces and sells seamless and welded steel tubular products, and provides related services for the oil and gas industry, and other industrial applications. Tenaris S.A. was incorporated in 2001 and is based in Luxembourg, Luxembourg.
- (+35.84%) 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.
- (+31.90%) Genmab A/S develops antibody therapeutics for the treatment of cancer and other diseases primarily in Denmark. Genmab A/S was founded in 1999 and is headquartered in Copenhagen, Denmark.
- (+28.67%) UBS Group AG provides financial advice and solutions to private, institutional and corporate clients worldwide. UBS Group AG was founded in 1862 and is based in Zurich, Switzerland.
Worst performing positions (note that the position may not have been held for the full quarter, but performance shown for the security is for the full quarter)
- (-23.68%) Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufactures in the People's Republic of China. Daqo New Energy Corp. was founded in 2006 and is based in Shanghai, the People's Republic of China.
- (-16.71%) Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk provides telecommunications, informatics and network services worldwide. The company was founded in 1884 and is headquartered in Bandung, Indonesia.
- (-10.20%) MakeMyTrip Limited, an online travel company, sells travel products and solutions in India, the United States, Singapore, Malaysia, Thailand, the United Arab Emirates, Peru, Colombia, Vietnam and Indonesia. MakeMyTrip Limited was incorporated in 2000 and is based in Gurugram, India.
- (-9.16%) Sociedad Química y Minera de Chile S.A. produces and distributes speciality plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and sulphate, industrial chemicals, and other products and services. Sociedad Química y Minera de Chile S.A. was incorporated in 1968 and is headquartered in Santiago, Chile.
- (-7.06%) ICON Public Limited Company, a clinical research organisation, provides outsourced development and commercialisation services in Ireland, rest of Europe, the United States and internationally. The company was incorporated in 1990 and is headquartered in Dublin, Ireland.
Historically, market declines of the magnitude observed in 2022 have often led to favourable investment opportunities. This is the likely outcome this time as well. The performance of this strategy – and global equity markets in general – in the fourth quarter suggests that this recovery may already be under way. Some of the headwinds, such as high inflation, ongoing supply chain challenges and the underperformance of China all have the potential to improve as we move forward.