After introducing the two major markets of the fund - the Eurozone and the US, it's time to analyse other regions, such as the UK market, where we have investments via stock instruments.
Has mentioned in the launching of our first contract as advisors, the SICAV - Optimize Invest Selection is a balanced fund portfolio oriented for long-term savings composed of equity funds and bond funds.
The Fund is exposed to shares from the Eurozone countries; Switzerland; Sweden; Russia; Japan and Canada.
It bears to European High Yield, US Dollar, American High Yield, Norwegian Krone, Swedish Krona and Japanese Yen in the bond component.
Perspectives
The British economy suffered the worst recession in its history as it recorded a 9.9% GDP fall in 2020 compared to the previous year.
In fact, despite the Government's considerable stimulus — the interest cut by the Bank of England and the purchase of assets and the injection of liquidity to the companies — the measures proved insufficient and late compared to what happened, for instance, in other regions. Also, Brexit's endless novel was quite damaging.
Given the circumstances and the expected impacts of the United Kingdom's exit from the European Union (EU), the British economy will take several years to regain its pre-pandemic strength.
On the export side, around half of British exporters say affected by the new barriers. Trade between the EU and the UK is declining sharply.
Moreover, the United Kingdom's most significant impact may be the City of London losing its European financial centre crown. It is already happening to Europe's Amsterdam. In January, 9.2 billion shares were traded in The Netherlands' capital city, compared to 8.6 billion in London.
The same goes for the derivatives market, where the shares of Euro-denominated products traded in London has increased from 40% of the aggregate to... 10% only. This loss of speed is likely to ensue in the transfer of competences to the EU and elsewhere. The shares of trade in derivatives in Euros carried out in the United States has doubled at the same time, thanks to the equivalence rule: benefit. This is clearly one of the negative consequences of Brexit for London.
By the end of March, further negotiations will have to take place to decide on the conditions under which British capital rules may in future be considered tantamount to those of the EU. This equivalence would allow London better access to the European marketplace. But it would be the EU's unilateral choice. Meaning they can withdraw the UK's equality at any time.
In any case, the EU is in no hurry. The transfer of financial activities (and wealth) to the mainland, conveying it under the European Central Bank's supervision, is suitable for Europe. The EU might have won this sector's battle.
Nevertheless, the impact of Brexit on the economy, in general, is more challenging to forecast. Thanks to better management of the vaccination campaign, the United Kingdom should reopen its economy relatively quickly. On the other end, the Eurozone countries will not see any semblance of normality anytime soon. This optimism has brought the British pound to its highest level against the US dollar for almost three years. The same against the euro since the last Spring.
The recovery of the pound reminds investors that, although the British Government has mismanaged the Brexit and the pandemic at some period, the British economy will continue to benefit from important assets and eventually recover. Especially now, with the help of the massive vaccination campaigns, despite Brexit.
Strategic allocation
In terms of geographical area and depending on the prospects, we reserve 5% of the UK market portfolio.
By asset classes, and since the London Stock Exchange remains interesting to invest in the long term, our choice goes to the exposure of 5% in shares through ETFs or investment funds.
To better understand the portfolio of funds or ETFs of shares and bonds, review our level 4 of the Money Framework series. We also produced a video summing up the different steps to follow or evaluate the way that you manage the cycle of your income, savings and investments:
Embedded content: https://youtu.be/GCSRnsOTUdQ
When Euroconsumers Invest was born in June 2020, we presented ourselves with a clear purpose and well-defined objective: "EUROCONSUMERS INVEST is a new Business to Business approach with a Business to Consumer DNA". We work with all entities and organisations that want to contribute to a more sustainable Financial market and empower all citizens.
The idea is to take, through work with companies, information and advice that would reach the largest number of consumers. Consumer organisations' experience is clear: there is a long way to help citizens' financial literacy.
In this sense, we disseminate the way we work and the basis of our analyses delivered to partners.
Definitions:
Mutual fund – A mutual fund is a professionally managed financial product – investment fund - that gathers money from many investors to buy securities: bonds, share or both. The advantage of this product compared to direct investment - direct purchase of shares or bonds - is that by joining many investors, the amounts available to invest considerably increase, which reduces costs and diversifies the investment (a more significant number of securities purchased).
This option is the most recommended for those who do not have much money (tens of euros are enough to invest), time to monitor the investment daily (fund managers can do this for you), and little knowledge of the financial markets.
ETFs - An exchange-traded fund is an investment fund traded on the Stock Exchange as if it were a stock. An ETF can also be called an index fund. Most ETFs track an index, such as a stock index or bond index.