Jyske Invest Growth Strategy

Market Comments, Q1 2012

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The fund’s strategy and performance

The return was 9.91% for the first quarter, which was 0.64% above the benchmark return at 9.27%. In isolation, our minor underweight of risky assets hurt the return relative to the benchmark return, but this was more than offset by our pick of the right securities within the individual asset classes.

Review

The excellent start to 2012 for equities and credit bonds is generally due to three factors: economic indicators from the US were somewhat better than expected, the European Central Bank, ECB, made extraordinarily cheap loans available to banks (which have stabilised the Southern European bond markets and reduced the fear of a collapse by European banks), and the restructuring of Greece. In early March, these factors also supported the sentiment in the financial markets and it generally seemed that the pattern of the first months of the year should be repeated – with fair increases of financial bonds in particular, while the yield spread between the Southern European countries and Germany continued to narrow. The condition of the global economy proved somewhat better than feared at the end of 2011. Moreover, it had an impact that expectations of the future were very low in December 2011. When everyone expects a disaster, anything better will be an upside surprise.

Towards the end of the quarter, there was for the first time this year again a slightly jittery sentiment in the financial markets. Spanish bonds, for instance, came under renewed pressure. But the slightly weaker close does not spoil the impression of a truly positive quarter.

Outlook

In spite of the very positive sentiment in the financial markets in early 2012, we have maintained a minor underweight of risky assets in the portfolio. However, in February we increased our weighting of equities to the detriment of bonds since we expected that the ECB’s initiatives removed some of the largest risks for the short term. The portfolios still have a lower proportion of equities and a higher proportion of developed-market bonds than the benchmark. High-yield bonds now have a proportion in line with the benchmark – with more emerging-market bonds than corporate bonds.

With the ECB’s LTRO allotment and the agreement on a restructuring of the Greek debt, a couple of the largest tail risks seem to have decreased for the short term. Over a period, there has been less focus on the European debt crisis, but in spite of these initiatives we do not find that the fundamental problems have been solved. The question is whether the recent jittery sentiment in the financial markets, which has squeezed Spanish bonds, is a sign that the fundamental problems will set the agenda again. Accordingly, we maintain our underweight of risky assets.

Please note

Past performance is not a reliable indicator of future results. The value of and return on your investment may fall, and you may not get back the full amount invested. An initial charge is usually made when you purchase and sell units. The fund may invest in instruments denominated in various currencies. At least 75% of the fund’s assets will at all times be invested in EUR or hedged to EUR. You should be aware that changes in exchange rates may have an adverse effect on your investment. This may also be the case if EUR is not your base currency.

Information in this text should not be regarded as investment advice, and investors should consult their own investment and tax advisers before buying or selling.