December 2020 – The Covid year ends, what comes next?


We end an extraordinary year posting extraordinary returns: in December, SF Real Return was up +3.02% (+32.99% YTD), SF Prudent Growth rises +5.36% (+44.31% YTD), and SF Quality Stocks reports +0.24% MTD returns (+18.36% YTD).

Market commentary

2020 hasn’t given investors a moment’s rest: the most breathtaking crisis of history was followed by the quickest recovery ever. Flexibility coupled with a long term perspective has always been Altex’s cornerstone in the management of our client’s assets. In the long run, basics always work: companies generating the highest revenues and cash are the ones that perform best, and in times of crises, the best way to protect your portfolio is getting rid of investments that simply don’t look right. Good companies improve over time, while bad ones turn even worse, and this truism is more often the case than otherwise. Having a large number of successful investments is in fact more important than the size of each individual holding, and the most successful strategies are those that combine many small contributions.

Although we’ve done well this year, we start January with a clean slate and looking back, we find there is some room for improvement. The past is unimportant to new investors, and we must always look forward in our asset management. A decade of huge technological developments, disruption of traditional business models and far reaching social changes is ahead of us: we will learn to program devices with no special technological knowledge, productivity will increase thanks to artificial intelligence and improved computational capacities, social intercourse will be driven by compatibility algorithms, and sensorial experiences will be valued more than the physical possession of material things. While information and mobile communications will close gaps in the developing world, it will also increase them in developed countries. This setting is perfect for finding good Growth companies especially when coupled with fiscal and monetary stimulus by Governments and Central Banks; there is so much idle liquidity that the scarcest resource is, in fact, returns. Profitable assets are so much in demand that a great portion has already been exhausted (Government bonds, high quality credit, interest rates, etc….) Economic cycles are shortening and asset management needs to be increasingly flexible. Equity is still the profitable asset class with best chances going forward.

We begin 2021 by adding a new strategy to Sigma Fund Real Return: the Momentum Stocks strategy. We invest in a selection of shares with a higher fundamental momentum and risk/return ratio, which will allow us to adapt to cycle changes. The universe of shares with higher fundamental momentum has, on its own, posted returns of +34.01% in 2019 and of +23.46% in 2020. The price momentum factor adjusted by volatility provides even better figures and narrows the universe to a small selection of shares that are more attractive in the short-term.

As of 2021, Sigma Fund Real Return will combine 5 different strategies:

Momentum Stocks: companies with the best fundamental and price momentum;
Quality Stocks: global and industry leading growth companies;
Prudent Growth: market niche leading companies;
Tactical: flexible exposure to risk assets based on our proprietary market thermometer;
Risk Control: dynamic hedging of market beta and currency exposures.

2021 perspectives for the Prudent Growth and Quality Stocks strategies are also quite attractive, and independent exposure may be gained through investments in their respective funds. We also plan to launch an independent fund based on the Tactical strategy: it is the perfect complement for equity portfolios as it will increase or decrease exposure without investor intervention.

Finally, we expect to receive the CSSF’s authorization to transform Sigma Fund Sicav into a UCITS vehicle (the most stringent regulatory framework in terms of investor protection). While this transformation will in no way affect the strategies currently followed, it will allow investors to access the fund through distributors and platforms only offering this kind of investment vehicle.

We wish you a happy and profitable 2021.