The market

The loose monetary policy of the ECB has largely contributed to the stock rally. The current market valuation is assuming an unlimited availability of capital. This perverse effect translates to overconfidence and unusual risk tolerance.

Our portfolio

The performance of our portfolio is outstanding in its stability. Our option hedge is the main driver behind our steadiness, although it’s reducing our net performance by a third. We do not share the current market keenness for the various sources of risks. The shortfall induced by our options is a reasonable price to pay for the insurance of our portfolio. No major transaction has been performed in our allocation, except some profit taking on the portfolios with the highest stakes in commodities. We took advantage of the natural resources rebound (fostered by lower investments in exploration) to reduce our exposure. We remain slightly above 10% allocation in raw materials with our low cost producer. Our investments are predicated on weak ongoing commodity prices related to the strong oversupply of goods.

Going forward

Our cautious stance is in line with our wealth creation objective. Although our portfolio has low turnover, we remain extremely active in seeking new opportunities. The current market confidence will serve patient investors like us well.