House View

House View

House View

January 2021

5 minutes reading time

 

Credit Markets


 

In Hungary, disinflationary effects intensified in the fall, and due to the restrictive measures introduced at the beginning of November, declining price dynamics were observed in the Hungarian bond market in December. The central bank left both the key interest rate and the one-week deposit rate unchanged during the month, and the MNB is not expected to change its policy substantially in the period ahead. During the month, ÁKK presented the financing plan for 2021, which revealed that bond issuance in 2021 will be significantly lower, and the 3-year government bond auction will be canceled.

As a result of the news, the yield curve has been flattened, with yields falling by 10-12 basis points at the 5 and 10 year maturities. Developed market bonds varies last month. U.S. 10-year yields continue to rise and broke the psychologically important 1% mark. With Democrats won the majority in the congress and in the senate, and the president is also a Democrat, the U.S. bond market is beginning to price in a large economic aid package. In Europe, we continue to see negative interest rates given the very strong disinflationary process, but the yield on the 10-year German government bond, was able to rise by 10 basis points in the first weeks of January. The exchange rate of the US dollar closed the year weak against the major currencies and given that the US Federal Reserve is expected to expand the money supply in 2021, the weakening effects will continue to prevail in the New Year.

 

Within Asset Classes Underweight Slight Underweight Neutral Slight Overweight Overweight
Bonds  
Within Bonds
United States
Europe  
Emerging Markets  
HGB  

Table updated based on discussions in December 2020.

 

Equity Markets


 

In December, stock markets hit new all-time highs despite the rising US interest rates. Markets are very optimistic about vaccination and they are pricing in the best case scenario. We have our doubts about this, as most countries do not yet have a vaccination plan, and it is also doubtful that the drug companies will be able to manufacture enough vaccine in time. As a result, towards the end of the month, we drastically began to reduce risk in our funds.

During the month, just as it was in November, investors continued to buy small-cap companies, which made the Russel 2000 again the highest gaining index. It seems that the markets are already pricing that the Democratic majority will approve another, larger-than-expected economic stimulus package, which will benefit mainly small and medium-sized businesses.

As a result of rising interest rates, bank stocks continued to rise in December and outperformed other sectors. If our idea is correct and there will be a higher interest rate environment in the future, this trend will continue. Banks are not in the position they were in during the 2008-09 crisis, now they are well capitalized, and will be able to perform well in a rising yield environment.

 

The table below shows Aegon Asset Management’s view on the different asset classes and the weightings within them. As the markets have risen tremendously in the recent past, we are mostly neutral for the near future. We have a positive view of some emerging countries and the United States, but at the country level, our views are mostly divided.

 

Within Asset Classes Underweight Slight Underweight Neutral Slight Overweight Overweight
Equity    
Within Equity
Developed Markets    
Emerging Markets      
United States    
Europe    
Central and Eastern Europe      
Brasil    
Russia    
India  
China      
Turkey      
Japan  
South-Korea    
Taiwan      
South-Afrika      
Mexico      
Indonesia    

Table updated based on discussions in December 2020.

 

Our Funds and Outlook

 

In December the markets continued where they left off in November. The indices reached new all-time highs and new capital continued to flow into value-based investments. The reason for the optimism is that the first wave of vaccination finally started last month. But for now, only those who work in healthcare will receive the vaccine. The markets are already pricing that by the summer, a large portion of the population in the developed countries will be vaccinated, so the economies can return to pre-epidemic levels. Although further economic closures have been ordered in Europe and Asia until the end of January, but the optimistic scenario is that this will be the last such austerity. The major U.S. and European market indices already priced this in December. The Russel 2000 index rose more than 10% in December after rising nearly 20% in November, and other indices closed on their highs too. Of course, we are pleased with these market developments, but we believe that the markets had run very far ahead of themselves and that is why we have started to reduce risk in our funds. We don’t think a serious downturn is expected, but we think it’s likely that markets will rest at these levels for a while.

 

The following table shows the outlook for the Aegon Fund Manager’s focused funds. The positions refer to the months of November-December – depending on the current data and market developments – these investments may change significantly.

 

Portfolio Summary of last month What could make our forecast wrong
Aegon Moneymaxx Express Absolut Return Equity Investment Fund

The fund achieved a positive return in December. The fund still holds its platinum and gold positions as we believe this will be a good investment in a potential inflationary environment. In addition to the significant industrial use of platinum, we believe that these industries are booming. Towards the end of the year, we reduced our equity exposure. We are holding the previously purchased Ukrainian, Kazakh, Romanian, Ivory Coast and Mexican bonds and increased the Turkish exposure. We decreased the fund’s ruble position by half and opened a long forint position against the EUR and PLN. We reopened a position speculating on rising US long-term yields. We continue to hold the bank index position as we believe the coming period will be favorable for banks.

The biggest risk to the fund could be the fall of the equity markets and the expansion of emerging market bond spreads.

Aegon BondMaxx Absolut Return Bond Investment Fund

In December, emerging market bonds performed well, especially the Turkish market as a result of the new provisions. Because of this we increased our Turkish exposure and bought some local currency Hungarian government bonds.

In addition to the increase in credit spreads, the rise in rates in the mid-curve would be unfavorable for the fund.

Aegon Alfa Absolut Return Equity Investment Fund

The fund achieved a positive return in December. Over the past month, we have drastically cut back on the fund’s risk profile, taking advantage of the year-end optimism in the markets. We sold the regional equity and the European bank exposure, except for the Greek papers, which we just reduced in half. We are of the opinion that the Greek banking sector is still underpriced. Thus, the equity weight now approximately is at 20%, which consist of mainly value-based investments. As for the markets, we are of the opinion that a lot of potentially good things have already been priced in, so the stock markets have become vulnerable to any kind of negative news. Regarding the forint, we believe that it is still cheap against the euro, and a level of around 350 would rather reflect the fair value.

The fund’s performance would be negatively impacted by a sudden fall in the stock market for which we would not have enough time to prepare.

Aegon Maraton Total Return Equity Investment Fund

The fund achieved a positive return in December. By the end of the month, we had reduced our equity weighting from 50% to 40% after taking profits in the well-performing bank and regional oil positions. In December, we increased our exposure to the emerging markets, especially in South Africa. In addition, we have increased our exposure in the emerging market technology and video game sectors. Although value-based investments outperformed in the last two months of last year, but after the rally, we believe that it is worth rotating back into long-term growth sectors. . In December, we further increased our emerging market weight after believing that emerging markets are in a more stable position both economically and in the fight against the virus. The weakening of the US dollar will also greatly help these economies.

The excessive strengthening of the forint against regional currencies and the sudden fall of the regional stock market would have an adverse effect on the fund.

Aegon Panoráma Total Return Equity Investment Fund

The fund achieved a positive return in December. On the equity side, we reduced bank exposure by the end of the year. On the foreign exchange side, we continue to be long the Turkish lira and the ruble against the dollar. During December, we increased positions that will benefit from a higher yield environment. The fund also benefited from the weakening of the forint in December.

A sudden fall in the stock market would negatively affect the performance of the fund that we would not have enough time to prepare for.

Aegon Central-European Equity Fund

The fund achieved a positive return in December, but slightly underperformed its benchmark. The underperformance was mainly due to a Polish video game maker. Although emerging markets have risen over the past month, the CEE region has performed extremely well thanks to the banking, insurance and commodities sectors. At the country level, the fund overweight relative to the benchmark the Hungarian and Austrian markets, while the Czech, Polish and Romanian markets are underweight. At the sector level, the banking sector is underweight after we took some profit at the end of the month. The energy, utilities and retail sectors are under weight. The fund as a whole overweight against the benchmark by 106% due to its long-term positions.

The fund’s performance would be negatively affected by a large, sudden fall in the Central European stock market prices, especially in the overweight sectors and regional markets, which would mean a larger drop compared to the benchmark.

Aegon MegaTrend Equity Fund of Funds

The fund achieved a positive return in December and also outperformed the benchmark index despite the fact that value-based investments outperformed the growth sector in the past month. In December, the best performing sectors were the solar and clean energy sectors. The weakest performing sector was the emerging market technology sector, of which we increased the fund’s exposure at the end of the month. The fund is equally weighted against the benchmark.

A widespread stock market sell-off would negatively affect this fund.

Aegon Russia Equity Investment Fund

The fund achieved a positive return in December but underperformed its benchmark. The gold overweight is kept unchanged by the fund as we believe this asset class will outperform in the long run. The overweight of the retail sector remains unchanged by the fund because we believe that the turnaround in this sector was not only short-term but also will last for a longer period of time. We believe that a cyclical turnaround will occur in the Russian economy, so the steel sector is overweight and the technology and oil sector is underweight in the fund. Yandex and Alrosa are still underweight due to their extreme valuation. We are waiting for a more favorable entry point to increase the exposure in it. The fund was at neutral weight against the benchmark by the end of the month.

The performance of the fund would be negatively affected by a further escalation of US and European sanctions and a sudden devaluation of the ruble.

Aegon IstanBull Equity Investment Fund

The fund performed positively in December, but slightly underperformed its benchmark. The reason for the underperformance was that due to the index re-weighting, several small-cap stocks were included, which in our opinion became extremely overpriced, which is why we did not buy them. We remain optimistic about the Turkish market. The new financial leadership has made all the necessary decisions for the Turkish economy to perform well in the long run. Due to the measures mentioned above, we maintain the fund overweight against the benchmark in the banking sector and in the pro-cyclical industries. The fund overall is overweight against the benchmark.

The fund would be adversely affected by the sudden depreciation of the Turkish lira and unexpected, economically negative measures by the Turkish president.

 

 

Privátbankár.hu Klasszis awards:

 

in 2020

1st place Fund Manager of the Year: Aegon Magyarország Befektetési Alapkezelő Zrt.
1st place Portfolio Manager of the Year: András Loncsák
1st place Best Free Bond Fund of the Year: Aegon Emerging Europe Bond Fund – Zoltán Szűcs és Vitaliy Poplavets
1st place Best Long Bond Fund Of The Year: Aegon Polish Bond Fund – Gábor Németh
1st place Best Absolute Yield Non-Derivative Fund of the Year: Aegon Alfa – András Loncsák
2nd place Best Emerging Market Equity Fund Of The Year: Aegon Russia – György Pálfi

 

in 2019

I. helyezett Best Money Market Fund of the Year: Aegon Money Market Fund
II. helyezett Best Free Bond Fund of the Year: Aegon BondMaxx R series
II. helyezett Best Emerging Market Equity Fund Of The Year: Aegon Russia
II. helyezett Best Global Equity Fund of the Year: Aegon Emerging Market ESG B Series (previously: Aegon Asia)
III. helyezett Best Long Bond Fund Of The Year: Aegon Polish Bond Fund P Series

 

in 2018

1st place Emerging Portfolio Manager of the Year: György Pálfi
1st place Best Absolute Yield Non-Derivative Fund of the Year: Aegon Alfa – Ádám Bakos, Gábor Németh, Zoltán Szűcs
1st place Best Absolute Return Fund of the last 10 years: Aegon Alfa – Ádám Bakos, Gábor Németh, Zoltán Szűcs
1st place Best Domestic Money Market Fund of the Year: Aegon Money Market Fund
2nd place Best Free Bond Fund: Aegon Bondmaxx Total Return Bond Fund
3rd place Best Absolute Return Non-Derivative Fund: Aegon Moneymaxx Express
3rd place Best Free Bond Fund: Aegon Emerging Europe Bond Fund

 

 

 

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