Get to know the manager of Loriga SICAV
Francisco Javier Serrano Roldán
Senior SICAV Manager at Bankia Fondos
He has 19 years' experience in Financial Markets, the last ten managing absolute return mandates in Bankia.
Javier started his career path as an auditor at Deloitte. In 1996 he joined the Analysis Department of Urquijo Bolsa SVB, subsequently becoming its head. In 2005 he began his career at Bankia as the Head of the treasury portfolio invested in equities. Since 2013 he has been the Senior Manager of SICAVs in Bankia Fondos, specialising in multi-asset management with goals of absolute return and strict risk control.
Evolution of the SICAV
From our latest letter to the shareholders in June, have attended in the markets to the sharp drop that favoured the result of the favourable referendum to the Brexit and to the later recovery during months of July and August, that it has left us in much the same levels to the seen ones fair before the referendum.
As a good know, the The United Kingdom voted to go out of the European Union, despite which they forecasted surveys and houses of commitments. The result in favour of the Brexit it went of the 51.9 %, with a share of the 72 %. It is a historic event, unprecedented and with unpredictable consequences. This brand decision the beginning of a path very complicated and, above all, very uncertain for The United Kingdom, so much in the political field as in the economic and financial one. The European Union faces these same problems, although probably on a smaller scale.
How face in the portfolio on the day of the referendum (23 June)? We decided to face that day slightly long on risk, trusting in the fact that the probability was more inclined towards permanence. Nonetheless, had purchased enough coverages via options in case was produced the Brexit. We had decided Additionally to cover most of the exhibition to the pound sterling and to maintain open the exhibition to the dollar, that it finished acting of shelter. All of this allowed us to lessen enough the collapse of the markets just as you can appreciate in the graph that we show in the beginning of the article.
We still think that our previous position to the referendum was the suitable one, although, seen with perspective, the real problem wine then.Once the referendum result was known, we decide to sell companies potentially more exposed to the Brexit and put on slightly short in net terms of equities via the sale of futures in Eurostoxx 50 and S&P 500. Were convinced the Brexit you would add a lot of political and economic uncertainty in a moment already per se complicated. However, did not go thus. At that point prefer to do a clearly defensive commitment before the risk of a shock potential in the markets, that was not finally produced, knowing that that would impede us conveniently capitalise a reaction a the increase of the market.
Why the market has reacted good during the summer when after the Brexit we foresaw that we could have a summer convulso? Basically for the improvement of the macroeconomic perception and because three great uncertainties open of political type (Brexit, elections in Spain and elections in EE.UU.) have lost weight. Namely:
- Indexes of macroeconomic surprises positive field have been placed at during the summer, so much in EE.UU. as in Europe. In China and in the emerging countries, these indexes follow in negative, although they have also improved. It is of emphasising, in EE.UU., the great strength of the consumer spending, the business job market and confidence.
- These details, together with some political type statements, have provided that the market starts to quote a stage of growth and stabilisation recovery in the medium term, based on fiscal leverages, infrastructure plans and policy neglect of types zero.
- On the other hand, the Central Banks have followed intervening, which is why the market has followed operating with a certain “security”network. After the Brexit, the Bank of England surprised with a policy of stimuli a lot more aggressive of the expected thing since, apart from going down types in 25pb as was expected, announced a QE of 60,000 M.GBP for the next 6 months. On the other hand, the Fed is not expected to raise rates until its December meeting (quoted probability of 52%). The probability assigned to September is only 24%.
- When it comes to the business results, US companies surprised us favourably with their profits (-3% vs an estimated -7%) and income (+0.5% vs + an estimated 0.3%) to a consensus with very conservative estimates.
- In internal key, the general elections in Spain of the 26-J eliminated a lot of pressure, since, although Government, the market has still not been formed discounts no there will be an executive led by forces populists.
- Against our idea, the worry for the Brexit it has yielded enormously in a very brief term. The new Prime Minister, Theresa May, is delaying the appeal to the article 50 and in its new government there is a “soft” faction supporter of the model Norwegian. Hammond (Finance Minister) requests measures to absorb the effect of the Brexit, a leaf of exit that it allows to The United Kingdom the access to the single market and grantings to protect the City.
- The other great uncertainty factor until end of the year, the presidential elections in EE.UU., it has also lost focus for the market given that internal problems of the Republican Party and excesses of Trump, seem to distance to this of the White House. Clinton is winning by more than six points in the surveys, which implies a probability of victory of 79%. The democrat candidate does not excite to the electorate, but at first, its victory would have positive consequences for the general market for appearing as a moderate, predecible and not to bet for the protectionism.
A very notable fact of August is that, despite the fact that the great equities indexes (by countries) have barely been moved, yes that has had very notable movements to sectorial level. That has been been able to to see most notably in latest sessions of the month. In Europe, have seen significant advances in banks, chemistries, construction and insurances, whereas falls of similar caliber have been seen in drugstore, basic resources and utilities.
That clear relay sectorial (cyclical with an upward trend vs defensive with a downward trend) has come favoured by an expectation of great returns in the interest rates (pushing to banks and insurances) and fiscal stimulus expectations (pushing to construction and industrial). Given that the market was positioned in a very defensive way after the Brexit, that change has forced a close of short in the cyclical sectors that it has exaggerated the movement.
The other big change that is received on the market of equities is of technical type. In the sectors of more cyclical character (banks, basic resources, chemistries, industrial), as well as in the German DAX, that you usually anticipate to the general movements of the market, you can appreciate how bearish service channels are being broken or figures of tendency change are confirmed. Of consolidating this movement, the market would be able to be leaving back the initiated downward trend in April of last year. So far, have positioned us increasing something the risk in equities and, in particular, in the banking sector, where until now barely had exhibition. The banking sector is still that one of worst behaviour in the year (-21 % YTD), but they start to change some things, particularly the idea of that the regulator would be able to relieve the pressure on the sector in the future, and of that the volume of credit can grow in virtue of different economic policies, fiscal and rise expansion of the investment in infrastructures.
As this report is being written (close 6 September), the performance so far this year in the SICAV is -1.7%, compared to falls of 6%/7% in European equities and slight gains in fixed income. The daily volatility of the portfolio from its birth follows under 5%, that is, almost five times less than that which you can observe in the market indexes.
After recent movements, our net investment in equities (taking into account coverages) it is 21%. In the field of the fixed-income, in the latest three months have added to the portfolio two ETFs, one of them of high yield European, and another of American bonds linked to the inflation.