2022 heralds a volatile year, for the vast majority of financial assets
As an appetizer, January was marked by many factors contributing to an atmosphere of general uncertainty. The umpteenth Covid variant continued to disrupt supply chains in parts of the world. This has maintained industrial shortages as well as upward pressure on prices of everyday goods, now showing up in high inflation figures.
In addition, the ‘drums of war’ resonated in Eastern Europe. Russian-Ukrainian tensions fueled elevated energy prices, and by extension even higher inflation levels in the United States.
As the ‘icing on the cake’ of a chaotic world, the American financial authorities announced normalization their new monetary agenda more hastily than expected. At the same time, the Federal government withdrew $700billion of liquidity from the credit market (see the change in the TGA account balance in 2022).
Nimbleness in uncertain times allows for a capacity to deal with different eventualities. For months now, the ASG portfolio has been positioned more and more defensively, in order to minimize the impact of a changing monetary policy, in particular interest rate increases. Through a significant reinvestment capacity, this positioning should allow the fund to further increase the level of its carried return in the future.
For months now, the ASG portfolio has been positioned more and more defensively, in order to minimize the impact of a changing monetary policy, in particular interest rate increases. Through a significant reinvestment capacity, this positioning should allow the fund to further increase the level of its carried return in the future.
For the ASG DYNAMIC INCOME FUND:
Assets with maximum maturity of 18 months + Cash: 10.6%
Assets fixed then variable rate coupon maximum maturity of 18 months: 22.5%
Assets with a variable rate coupon: 15.9%
Bonds yielding between 5% and 7% now make up the majority of the remaining assets not included above. The modified duration of the fund has been reduced from 4.4 years at the end of January 2021 to 3.8 years at the end of January 2022.
The portfolio remains subject to occasional turbulent variations in the valuation of its assets, as was the case in 2016, 2018 and 2020. However, its longer-term trajectory is carried by an average gross yield of 5.5% in $, a return which is likely to increase even further over the coming months.
