Report August 2022

The state of the stock market, fundamentally, has not changed. Everything is still focused on inflation. The message from the central banks in Jackson Hole has been clear: The priority is to control inflation, even at the cost of sacrificing more growth and employment. In recent weeks, this has led to expectations of further increases in interest rates and the belief that these will remain high for longer.

Pareturn GVC Gaesco Columbus European Equity Fund Class I was down 5.54% in August in line with markets. Over the last three years it has risen 14.26%. Since its inception in June 2008, Columbus has returned 127.50%, far outperforming European equity indices. The volatility during the last year has been 18%.

Performance Columbus Fund

The market now expects the Fed to raise rates to 4.75% in early 2023, instead of the previous 4.5%, and both the Bank of England and the ECB to raise rates to 3.25% and 2.25% respectively from the expected rates of 2.0% and 1% from before summer.

In many respects, the fundamentals remain favourable: labour demand is at record levels in both the US and Europe, the financial system is well capitalized, families have high levels of savings accumulated during the pandemic, and companies have not increased their productive capacity. However, growth in 2023 will be weak, with a heightened risk of recession, especially in Europe (late 2022-early 23), which will begin to materialize after the summer, given the energy shortage.

We continue to think that the key to the behaviour of the markets is the future evolution of inflation. The falls we have seen in the price of oil and other raw materials, as well as the easing of supply chain disruptions, such as improvements in freight prices, augur drops in inflation, which will begin to materialize in the last quarter of this year and especially in 2023, when last year’s energy increases fall out of the calculation.

We reiterate what we said last month: stock markets will react positively when we start to see better inflation data in the last quarter of this year and in the first quarter of next year. European equity valuations are below their average valuations in recent years, mutual funds have increased their liquidity levels dramatically and investor pessimism is at its highest level since 2009. All these are positive indicators of future stock behaviour.

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We thank you for your trust and wish the best to you and your families during these uncertain times.

Since June 14, 2018, both national and foreign investors can access the Columbus strategy through the Master-Feeder structure between Columbus 75 Sicav in Spain (feeder) and the registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund in Luxembourg (master). The Luxembourg vehicle offers institutional and retail share classes denominated in euros. We have also just set up a sterling share class to facilitate investment from the UK.