.jpeg)
The 2022 Crystal Funds
For the second year in a row, the Value Square Fund - Equity Belgium C Cap wins the Crystal Fund in the Belgian equity fund category. The Brussels Stock Exchange is a small market, but it has advantages. It has a lot of small caps and may therefore be interesting in a portfolio such as diversification.
Preface: Dealing with risks and uncertainty
In these times, it is a real challenge to award the best-performing funds of the past year. The end of the lockdown at the end of 2021 was a prerequisite for the economy to recover. But the analysts revised their growth forecasts downward when a new wave of infection emerged. The portfolios were then switched from growth stocks to value stocks. But Russia's invasion of Ukraine in February was a game changer. The increase in energy prices came on top of the rise in commodity prices. There were also bottlenecks in supply chains in a fairly tight labor market. From that moment on, there was no longer any temporary inflation.
Inflation, rising interest rates and falling markets are factors that fund managers faced between July 1, 2021 and June 30, 2022. While the winning stock funds were able to hold on to positive returns during this period, bond funds were in the red. In these categories, the funds that were able to limit the damage are rewarded. A year ago, there was optimism among fund managers. Today, there is a recession, inflation that has not reached its peak and more interest rate hikes by the central banks. The economic and financial environment for administrators will remain a challenge in the coming months. It is now growth and inflation expectations that drive the markets. In such an environment, administrators can only set up scenarios with different scenarios and hope they make the right choices.
Ranking and methodology
The La Libre and De Standaard Crystal Funds will be awarded in the autumn based on one-year performance as of June 30. In the current context and due to uncertain geopolitical conditions, inflation and rising interest rates, it seems increasingly difficult to choose from the very (too?) large number of financial products on the market. Investors still rely too often on the performance of funds alone. Today, La Libre and De Standaard are presenting awards based on returns between July 1, 2021 and June 30, 2022.
This award honors the best funds per category based on their performance. These Crystal Funds focus on ten categories of funds: investors in Belgian stocks, securities investing in global stocks, European stocks, US stocks, small & mid caps, corporate bond securities securities and sovereign bonds. This is followed by the three awards for defensive, neutral and dynamic patrimonial investment funds.
The rankings are drawn up by the company Symex and under its responsibility. They are given for informational purposes only. The editors of La libre and Le Standaard opted for a simple methodology. Within each category, the funds are ranked according to their “pure” performance, without taking into account their volatility.
This performance is calculated on the basis of the one-year performance from July 1, 2021 to June 30, 2022, which is weighted for 75%. In addition to these achievements, the performance evolution over three years is weighted at 25%. Only funds that are offered to the general public (retail) in Belgium without a minimum entry fee can be included in this ranking. For each nominated and winning fund, this was confirmed by the issuers of the funds. This is the responsibility of the authors and not the editors of the two publications.
Remember that asset management is not a sprint, but a marathon that must be evaluated over time and in the long term.
However, we must remember that return should not be the only criterion to take into account when choosing an investment fund. Past performance is no guarantee for the future. This cannot be repeated enough! This ranking is therefore published for informational purposes only. Under no circumstances should these awards and nominations be considered investment advice.
Remember that asset management is not a sprint, but a marathon that must be evaluated over time and in the long term. Investment horizons and objectives must be taken into account. Before investing, it is always advisable to obtain information and review the KIID (Key Investor Information Document), which is specific to each fund and informs the investor about the fund's risk level, costs, investment universe and performance. Documents with information to supplement this award ceremony.
Isabelle The Laminne
The winners speak: Patrick Millecam (Partner - Senior Portfolio Manager)
What factors explain the good performance of your fund during this period?
Indeed, the Belgian market is rather a market for small and medium-sized companies. We screened the portfolio to see if each company is reasonably equipped to face the challenges that affect all companies (strong cost increase due to inflation of many commodities, rising energy prices, shortage of components, tight labor market, automatic wage indexation in Belgium). When compiling our portfolio, we paid particular attention to the pricing power to choose those companies with strong pricing power. We also had a relatively large cash position at the beginning of 2022, so we were less affected by the correction in the stock markets.
The portfolio stocks that showed the strongest return over the period July 2021 - June 2022 are Aliaxis (+54.2%), Euronav (+51.3%), Van de Velde (+45.2%), Resilux (bid, +40.4%), D'Ieteren (+38.7%), Sipef (+37.9%) and EVS (+31.2%). Of all Belgian equity funds, we have the lowest percentage of Bel20 shares. That is why we have the highest “active share” of all funds that have been in existence for at least 5 years. We are fairly benchmark agnostic. We choose those stocks with the best risk-weighted upside potential.
The potential of Belgian stocks
For the second year in a row, the Value Square Fund - Equity Belgium C Cap wins the Crystal Fund in the Belgian equity fund category. The Brussels Stock Exchange is a small market, but it has advantages. It has a lot of small caps and may therefore be interesting in a portfolio such as diversification.
“The Belgian market is indeed a market for small and medium-sized companies. There are only 107 Belgian companies with a market capitalization of more than 25 million euros. If we use the Euronext definitions, there are 42 mid caps on Euronext Brussels and 22 small caps. In other words, 60% of the number of Belgian listed companies (with a market value of at least 25 million euros) are small and medium capitalisations. Large caps, above one billion euros, account for 40% of the number of companies, but 93% of the total market capitalization“, acknowledges Patrick Millecam, manager of the Value Square Fund - Equity Belgium.
In this context, how do you manage a fund in such a small market? The manager admits that he makes his choices outside the Bel 20 index through active management and pure stock picking. Each company is then screened. In a context of high inflation, it is mainly important to single out companies with strong pricing power, i.e. companies that can incorporate increases in costs, energy or raw materials into their sales prices. In certain market situations, it is also good to keep cash handy in order to take advantage of opportunities.
But what could be the added value of such a fund compared to larger funds that invest in European or global stocks? 'The added value for customers and shareholders of Value Square and Equity Belgium lies in the strong succession of all Belgian stocks. Every year, Value Square conducts a major study into the fundamental value creation of all Belgian listed companies. We therefore believe that clients are entitled to truly active management and good performance.,” adds Patrick Millecam. This market, on its own, is discreet, but has a few gems. For Belgian investors, certain listed companies are sometimes linked to personal experiences. By investing in such companies, you can say that you are a co-owner.
'Listed companies have a relatively stronger presence in the media than unlisted companies. This way, you can better monitor these companies, you can taste their products or use their products and services. Invest in what you know is a well-known stock market wisdom. It also gives you more peace of mind. This is an important element for an investor to prevent panic buying and selling at the wrong time. This allows him to achieve better returns in the long term. And what's more, there are few companies that are solely dependent on the Belgian economy. With a Belgian equity fund, you can also benefit from economic developments in the rest of the world (Europe, US and Asia),” says Patrick Millecam. It is true that Belgium is a small country with a view of the world. Our small stock market therefore has a number of advantages that the winner in the category of funds invested in this market has been able to benefit from.
Isabelle de Laminne
Disclaimer
This article was written at the initiative of De Standaard and was not sponsored by Value Square, it was taken over in its entirety.
- NL: The Standard
- FR: La Libre
- SCARY: Business Update
