Investment

Chart of the Month – Something wrong? Eat chocolate.

by Marie-Caroline Fonta

Something wrong? Eat chocolate.

Source: Bloomberg, Notz Stucki

The month of May has come with its various news, we experienced the first month in negative territory since December 2018. We had however started the year well with four consecutive positive months. May brings some questions to investors: Should I sell? Do I have to worry? … What can I do?

One simple action would be to increase exposure to defensive stocks. Find and invest in companies with, among others, stable earnings, low beta and constant dividend. By definition, the Swiss market has demonstrated a defensive nature over time. Links exist between movements on the US yields and world equity markets, the impact could be more or less significant. In the graph above, over an eleven-year window, we find the 10-year US yield on an inverted scale and the ratio Swiss market over the MSCI All Country World Index. The trend has been reversed since mid-2018: the Swiss market outperforms the world index. We notice that lately when yields go down in US (in our example the 10-year) Swiss market performs and since mid-2018 much better in relative terms.

One step further, what is the actual composition of the Swiss market? Is it really defensive compared to MSCI All Country World Index? Analysis focused on the major Swiss Index: SMI Index. We selected the sectors and subsectors that have a defensive nature, this means Consumer Staples, Insurance, Water, Gas and Electric-related companies, Apartment REITS and Pharmaceuticals, excluding Biotech companies. Results are straightforward: Swiss market detains more Consumer Staples (18.3% against 8.3%), more Insurance companies (10.6% against 3.9%), more Pharma (36.3% against 5.1%) than the MSCI All Country World Index and there is no exposure to Utilities – Water, Gas and Electric-related companies or Apartment REITS. The large Swiss exposure to Staples and Pharma through Nestlé, Roche and Novartis is well known, however, the exposure to insurance and therefore the overexposure to the world index is probably not as well-known.

To conclude, more than half of the Swiss market, i.e. 65.2% is composed by defensive stocks versus 18.7% for the World Index. If we extend the analysis to the SPI Index, as the Swiss market is full of specific and niche companies, results are similar. We do not specially expect a downturn and we are not ready to sell but to add defensive in one’s portfolio can be an attractive direction. Last month, Swiss stocks demonstrated resilience with a scant negative performance of -2.52% bringing the SMI’s performance to 12.99% YTD. Last but not least, it is difficult to ignore the very good performance of the king of Swiss Staples: Nestlé, at +24.75% YTD.

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Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

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Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

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