The fund took advantage of the correction on the stock markets to slightly increase its net equity allocation, which, at 19 February, was 34%, up from 30% in mid-January. However, while one month ago this allocation was the result of the fund holding 55% in equities, 25% of which were hedged through the sale of futures, BL-Global Flexible currently has 72.5% of its assets in equities, 38.5% of which are hedged through futures.

Using derivatives to achieve a net equity allocation of 34% may at first sight seem more risky than a classical structure consisting of ‘simply’ holding 34% in equities. The fact that we have increased the percentage invested in equities whilst also increasing our hedging is due to our conviction that the quality companies held by the fund should outperform the market, either on the upside or the downside.  The reasons behind this conviction are described in yesterday's post (see Market Analysis). It is also important to underline that not using futures would force us to keep a high proportion of the fund’s assets in cash, currently returning practically nothing, given that the percentage invested in bonds is only 22.5%.

The bond portfolio remains mainly invested in government bonds, with the corporate bonds portion having even been reduced following their good performance in 2009. As far as the eurozone is concerned, the only government bonds held are issued by Germany and the Netherlands. Euro-denominated bonds represent 15 % of the portfolio, with the remaining 7.5 % invested in US, Australian and New Zealand dollars, Norwegian krone, Brazilian real and Indonesian rupees.