frankfurt In the past trading year, many investors suffered heavy losses. Even professionals couldn’t escape the downward trend brought on by the Ukraine war and rapidly rising energy prices, high inflation and rising interest rates. This is shown in the balance sheet of the fund that Scope Fund Analysis created exclusively for the Handelsblatt.

Funds focused on technology stocks underperformed particularly: They lead the negative list with average losses of 35.8 percent. Funds with a focus on Europe and North America also lost double-digit percentages. Bond products also fell massively in the course of monetary policy tightening by major central banks.

But there have also been successes. Some managers produced notable returns amid falling stock markets and bond prices. The Handelsblatt features two of these fund managers, from Jupiter Asset Management and Fidelity International, with their current strategies.

To prepare for the upcoming year 2023, it can be very helpful for investors to look back on the past difficult year 2022. What was strategically successful?

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It is important not to focus on narrow approaches such as regional or thematic investments. Rather, it is about finding broad and international concepts for the two most important liquid forms of investment, stocks and bonds.

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Loyalty: the big stock winner

On the equity side, Fidelity International’s “Fast Global” stands out. Manager Dimitry Solomakhin achieved a 22.4 percent return last year, while competitors with their international investment products lost an average of 15.8 percent.

“We are doing a very extreme value strategy, as we say in the financial industry. We focus on companies that are completely out of date on the stock market,” explains Solomakhin. That’s not a typical approach, on the contrary: “It’s a niche.”

That is why it has a past with sometimes not particularly good investment results. “Until 2020 it was very difficult for me,” she admits. Investors bought technology stocks, which rose in price. But he himself almost never had such actions.

This improved in times of the pandemic. With the news of effective vaccines, it improved its position with companies in sectors such as retail, tourism and industry. “2021 was a good year for us, 2022 was exceptionally good,” he sums up.

Favorites: Europe and China

He is currently less focused on the US stock market, but is increasingly concentrating on it. Europe: “Companies from Great Britain, for example, are attractive to us,” he explains, “which are currently not in high demand among many investors.” Strategically, however, he has a “preference for the unloved.” He holds senior positions at British companies Ocado and Babcock International, as well as Swedish Ericsson.

He also sees China as a beacon of hope. Despite the many problems in the country, it has been bought there in the last two years. “And now our entry is beginning to bear fruit,” says Solomakhin. Boosted by the lifting of stringent anti-Covid measures, Chinese stocks have halved in value in the past three months.

>> Read about it: No one can predict what will happen in China, not even Goldman Sachs

Loyalty man, unlike many of his competitors, also has the ability to bet on falling prices with limited funds. He has practiced it successfully in recent years with stock market shells, the so-called Spacs, as well as stock market debutants.

Solomakhin sees excessive speculation in many markets, such as cryptocurrencies. “The bubble was driven by ultra-loose monetary policy and government spending programs – it was a fairy tale world for investors,” Solomakhin recalls of the past few years of stock market booms. Now the world has returned to the path of normality: “The relapse started in 2022, and that will take a few years.”

Jupiter Strategic Absolute Return Bond Fund: The Big Bond Winner

Fidelity International’s “Fast Global” counterpart in global bond strategies is the “Jupiter Strategic Absolute Return Bond Fund”. It belongs to the British Jupiter Asset Management. Manager Mark Nash turned in a 12.3 percent return there last year. This is the clearest way to differentiate yourself from your competitors, who suffered an average loss of nine percent.

With his strategy, Nash follows assessments of important economic factors. Early last year, even before the invasion of Ukraine, he expected interest rates to rise and therefore expected dollar bond prices and emerging country securities to fall.

>> Read here: Lagarde emphasizes: inflation is still “too high”: bond yields are rising

The economic situation is normalizing now. Inflation rates would fall, though not to the central banks’ target levels. the energy prices therefore they should also lose their threat potential according to Nash. “Recession fears will be exaggerated,” believes the London strategist.

For example, you have federal bonds in the fund, but probably not long-term. “If economic growth picks up, we’ll bet on falling prices,” says Nash. He also owns Italian government bonds with a current yield of four percent. In the case of UK government securities, you are prepared for falling prices.

Top interest rates in emerging markets

He also senses opportunities in emerging countries in terms of emissions local currencies. Indonesian bonds returned as much as 7 percent, Mexican bonds more than 8 percent and Brazilian ones as much as 12 percent. When it comes to corporate bonds, he is concentrating on these countries as well, as well as US companies.

The proportion of the fund’s capital with which he currently bets on falling prices is less than at other times. “With the higher interest rates, there are now attractive investment opportunities,” he says, explaining, “Most of our fund’s gains come from price changes, not interest income.”

It can also go wrong

With both Fidelity and Jupiter strategies, investors need to ask: How sensible are approaches where the manager can also bet on falling prices? In the positive case, this generates gains in bad stock markets, like last year.

However, strategies with more freedom, such as betting on falling prices, can also go awry if the market rises unexpectedly. “Then the manager missed the market gain and produced additional losses with his negative bet,” says André Haertel, an analyst at Scope.

Therefore, he advises: “Only experienced investors should deal with such approaches and only invest in them to a limited extent.”

There is hope for 2023

For the current year, the market expert sees a little light on the horizon for investors. “It is practically impossible that the results of 2023 will be as bad as those of 2022,” he says.

Other market experts share his opinion and are cautiously optimistic, although the first trading days of January with high gains in the stock markets such as a Dax plus of ten percent do not look sustainable in the long term.

Fund managers’ hopes are mainly based on recovery or even trend reversals in individual markets. These include those severely depressed by the harsh strategy of Covid chinese stock exchanges or tech stocks hit hard by higher interest rates.

Thanks to much higher yields, some managers are now buying bonds again as well. “Interest rates are back.” Under this heading, Scope-Mann Härtel groups the turnaround after years of negative interest rates around the world.

More: Professional investors trust these sectors

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