As I mentioned yesterday in my article in the "Analysis" section of the blog, I believe that the expectations of economic recovery behind the rise in risk assets since March will be short-lived. This view is reflected in the BL-Global Flexible fund. The fund’s net equity weighting is 30% (44% of which one third is hedged through the sale of futures). The geographical allocation is 19% Europe (net exposure: 9%), 12% North America (net exposure: 8%) and 13% Asia (net exposure: 13%). The portfolio’s sector allocation is defensive, particularly in the eurozone where investments are concentrated in companies paying out high dividends (the average gross dividend yield of this portion is 7.3%) and whose activity is less dependent on the economic situation.

 

The rise in long-term interest rates has enabled us to increase the bond weighting to its current level of 49%. The fears of inflation behind the recent rise in long-term interest rates seem at the very least premature in an environment of plummeting capacity utilisation rates and rising unemployment. The government / corporate bond allocation is 41%/8%. While the fixed-income portfolio is mainly invested in euro-denominated bonds, over the past few weeks, positions have nevertheless been taken in the currencies of countries whose economic fundamentals and outlook are more promising than the eurozone. This explains our decision to invest in bonds denominated in Norwegian krone, Australian dollars and Brazilian real, which take up 6% of the portfolio.  The characteristics of the bond portfolio are as follows: average maturity of  6.5 years, yield to maturity of 3.63% and a modified duration of 5.507.

 

In sum, the asset and currency allocation in BL-Global Flexible currently looks like this: