Dear client,
The stock markets have once again rewarded the quality of the companies we have selected. This performance was reflected in the returns of the EDM funds under our own management and those for which we have delegated management due to their special characteristics. Fixed income portfolios have also performed well.
I will try to summarise the issues that I feel are relevant for you in the next 12 months and beyond.
A. Macroeconomics: a guide for making investment decisions?
Many clients ask us about foreseeable economic developments in the countries where the companies in the portfolios are domiciled, and also those that are large issuers of public debt.
As you know, EDM does not base its portfolios on anticipating macroeconomic developments. This statement makes even more sense today given the current high degree of uncertainty, as investors have been changing their forecasts for the US economy throughout first half of 2024: a slowdown, a reacceleration or even a recession.
As a result, central banks have been adjusting their monetary policy messages as they go, i.e. policy rate announcements. Debt markets and stock markets have been moving accordingly (Figure 1).
In this environment of unpredictability, we have chosen to conclude that, unless we fall into deep recession (not impossible but not likely), interest rates will ease moderately but not as much as expected at the beginning of 2024. As we will see in the next section, this change will not last forever.
The impact of interest rates on valuations (P/E) is more relevant than macroeconomic developments since governments and central banks have made efforts to smooth the intensity and shorten the duration of business cycles.
B. Looking ahead: higher interest rates
In our long-term approach to asset management, we have incorporated a vision for the next few years that is very different from the last 10 years.
The new vision has the following profile:
- Less globalisation
- Economic and geopolitical fragmentation
- Major investment efforts to address:
- Defence costs
- Investments in digitalisation
- Investments in decarbonisation
The result of all this is a call for spending, which will put pressure on interest rates, preventing a return to those rates prevailing during the very long “great moderation” (2010-2022).
This is leading us to take an approach of greater diversification when structuring the portfolios (asset allocation), as we already mentioned at the last Investor Forum (November 2023).
C. How to navigate the new scenario?
A scenario such as the one described in the two previous sections is a challenge for those who wish to generate returns (interest/dividends + appreciation) that exceed inflation; and, incidentally, it seems that in the medium term it will be difficult to return to the 2% target indicated by central banks.
Essentially we see that the majority of the assets that outperform inflation, although not the only ones, are the shares of quality companies. The reason for this is that of the 3 components that determine the total return of listed shares, we believe that the most relevant will be dividend and earnings per share (EPS) growth and not so much the expansion of the multiples (P/E). The latter have already made a strong contribution in recent years.
As this was the case in the first half of the year, our team of analysts has been able to confirm in meetings with companies that the 5-year average EPS growth in a global portfolio is in the double digits (12%-18%). This conviction should be a source of comfort in today’s polarised political and social environment, as our experience tells us that political/geopolitical crises have a limited impact over time (Figure 2).
We therefore face the summer period with our familiar “sceptical optimism” but having already diversified our portfolios with low volatility assets to take advantage of any opportunities that may be offered by the changing moods of investors.
We thank you again for your trust and wish you a happy summer.
Yours sincerely,
Carlos Llamas
Chief Executive Officer
LEGAL CONSIDERATIONS
1) This information is for advertising and information purposes only. It is not and cannot be considered investment advice or a legal opinion, is not intended to replace necessary investment advice and does not constitute an offer to sell or a request to buy.
2) All opinions and estimates provided are based on sources believed to be reliable. However, EDM Gestión, S.A., SGIIC cannot guarantee that these sources are accurate or complete, and assumes no liability whatsoever for any direct or indirect loss that may result from the use of the information provided in this document.
3) This information includes data referring to past performance of the products mentioned above. EDM Gestión, S.A., SGIIC warns that past performance is not a reliable indicator of future performance.
4) Investors should be aware that the products included in this document may not be suitable for their specific investment objectives, financial or equity position, or risk profile. Investors should therefore make their own decisions taking into account these circumstances and seek specialised tax, legal, financial, regulatory, accounting or other advice as necessary.
5) It is stated for the record that the instruments included in this information may be affected by various common causes such as:
- Market disruptions due to unforeseeable circumstances.
- Liquidity risks and other risks that alter the performance of the investment.
6) This documentation may include data based on currencies other than those used by the recipients of the documentation. Therefore, the possibility of any upward or downward change in the value of the currency and its impact on the results of the proposed products or instruments must be considered.
7) For each of the EDM Gestión, S.A., SGIIC Funds, a full prospectus, a key investor information document, periodic reports and the latest audited financial statements are available to the public and can be requested free of charge at the registered office of the Management Company or on the website www.edm.es.
8) EDM Gestión, S.A. SGIIC is a public company incorporated under Spanish law, registered in the Collective Investment Undertaking Management Companies Register of the Spanish National Securities Market Commission (CNMV) under number 49 and registered with the Commercial Registry of Madrid in volume 36,739, page 52, sheet M-658.326, with tax identification number A-58.217.175. It engages in the representation, management and administration of investment funds and investment firms domiciled in Spain and under Spanish law, and discretionary investment management.
DISCLAIMER
EDM Ahorro FI is an authorised investment fund regulated by the CNMV (registration no. 47) and managed by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). It is a fund with a risk profile of 2 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 4.78%; 2020: 0.38%; 2021: 1.58%; 2022: -4.08%; 2023: 5.34%.
EDM Renta FI is an authorised investment fund regulated by the CNMV (registration no. 530) and managed by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). It is a fund with a risk profile of 1 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 0.61%; 2020: -0.3%; 2021: -0.11%; 2022: 0.07%; 2023: 3.20%.
EDM Credit Portfolio Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF) (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 3 on a scale of 1 to 7. Since the inception of Class L on 19/01/2021 and until 31/12/2023, it obtained the following annual returns: 2022: -14.66%; 2023: 8.85%.
EDM Cartera FI is an authorised investment fund regulated by the CNMV (registration no. 4043) and managed by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). It is a fund with a risk profile of 3 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 16.12%; 2020: 3.87%; 2021: 12.98%; 2022: -16.28%; 2023: 17.51%.
EDM Inversión/Spanish Equity Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the CSSF (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 5 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 12.36%; 2020: -10.18%; 2021: 14.52%; 2022: -12.69%; 2023: 17.28%.
EDM Strategy Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the CSSF (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 4 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 30.42%; 2020: 0.28%; 2021: 29.23%; 2022: -17.81%; 2023: 26.01%.
EDM Global Equity Impact Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the CSSF (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 4 on a scale of 1 to 7. Since its launch on 30/05/2022 and until 31/12/2023, Class L obtained the following annual returns: 2023: 21.24%.
EDM American Growth Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the CSSF (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 5 on a scale of 1 to 7. Since the inception of Class L on 18/01/2021 and until 31/12/2023, it obtained the following annual returns: 2022: -43.38%; 2023: 34.92%.
EDM Latin American Equity Fund is a sub-fund of EDM International SICAV authorised in Luxembourg and regulated by the CSSF (registration no. 851). The Management Company is Waystone Management Company (Lux), S.A., which is subject to oversight by CSSF. The sub-fund is managed and marketed in Spain by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). This is a sub-fund under Article 8 of the SFDR. It is a fund with a risk profile of 5 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 22.32%; 2020: -28.51%; 2021: -19.03%; 2022: 11.17%; 2023: 24.91%.
EDM International Equities FI is an authorised investment fund regulated by the CNMV (registration no. 2817) and managed by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). It is a fund with a risk profile of 4 on a scale of 1 to 7. Over the last five years, Class L obtained the following annual returns: 2019: 6.68%; 2020: 1.95%; 2021: 5.07%; 2022: -14.98%; 2023: 24.40%. There were significant changes in policy in 2022. The data prior to 2022 are not representative under the current investment policy.
EDM Pointer SA SIL is an authorised hedge fund regulated by the CNMV (registration no. 26) and managed by EDM Gestión, S.A., S.G.I.I.C. (CNMV registration no. 49). It is a fund with a risk profile of 4 on a scale of 1 to 7. Since its launch on 26/11/2021 and until 31/12/2023, Class A obtained the following annual returns: 2022: -7.96% and 2023: 13.16%.
Fondomutua Pensions UNO, FP is an authorised pension fund regulated by the Directorate General of Insurance and Pension Funds (DGSFP) (registration no. F2154). Mutuactivos Pensiones, S.A.U., S.G.F.P. (DGSFP registration no. G0135) is the Fund Manager and EDM Gestión, S.A., SGIIC (CNMV registration no. 49) is the Delegated Manager and Promoter. It is a fund with a risk profile of 2 on a scale of 1 to 7. Over the last five years, it obtained the following annual returns: 2019: 3.79%; 2020: -0.67%; 2021: 1.57%; 2022: -8.16%; 2023: 4.44%.
Fondomutua Pensions DOS, FP is an authorised pension fund regulated by the Directorate General of Insurance and Pension Funds (DGSFP) (registration no. F2155). Mutuactivos Pensiones, S.A.U., S.G.F.P. (DGSFP registration no. G0135) is the Fund Manager and EDM Gestión, S.A., SGIIC (CNMV registration no. 49) is the Delegated Manager and Promoter. It is a fund with a risk profile of 4 on a scale of 1 to 7. Over the last five years, it obtained the following annual returns: 2019: 23.67%; 2020: 5.66%; 2021: 22.05%; 2022: -20.56%; 2023: 29.98%.
