Dorval Global Convictions Patrimoine: an SRI solution ranked 3 on the SRRI risk indicator scale to lock in world economic momentum and complement general account investments
The SRI-accredited Dorval Global Convictions Patrimoine fund marks its three-year anniversary today, June 22. The fund ranks 3 on the risk-return scale, and unlike most funds in this category with their predominantly bond slant, Dorval Global Convictions Patrimoine’s main performance driver is provided by international equities.
Dorval Global Convictions Patrimoine was launched in June 2018 to address a very precise goal: provide investors with a response to the maturity of the economic cycle, while also tackling the industry-wide challenge of the decline in average yield on general account investments as a result of low interest rates.
Dorval Asset Management has successfully risen to this challenge, with its portfolio management team comprising asset allocation specialist Sophie Chauvellier and the company’s two economists, François-Xavier Chauchat and Gustavo Horenstein. With Dorval Global Convictions Patrimoine, Dorval Asset Management offers clients a wealth management solution built on a top-down investment process, whereby we draw on the main macroeconomic scenario to ascertain investment themes deemed to be buoyant. These themes can be global – such as the energy transition – or local, such as growth in Asia, and dictate our selection of a broad range of international stocks that fit with these trends and/or meet the challenges we have identified.
Diversification, extremely low stock-specific risk, along with active and flexible allocation are the main drivers supporting the fund’s management objective of locking in world economic momentum. These features combine with our inhouse SRI policy and ensure that the portfolio’s risk is steered within a managed range. The portfolio’s response to successive natural stress tests over recent years testifies to our robust investment process.
Francois-Xavier Chauchat states: “the fund offers a response to the current environment, marked by reflationary policies that could push up interest rates after several decades on a downtrend. Meanwhile it is increasingly difficult to consider sovereign bonds as a very effective way to hedge against equity risk. Risk on bond investments has become entirely asymmetrical, as the possibility of gains is now minimal with interest rates unable or barely unable to decrease, while risks of loss are high if interest rates rise. This situation leads to pressure on a whole series of wealth management strategies that are most often bond-based, creating difficulties for investors as they need to look to fresh solutions. Our Dorval Global Convictions Patrimoine fund provides a response to this situation, offering a solution where the central strategy can be equity/cash, while bonds can be invested merely from an opportunity-driven perspective.”
Sophie Chauvellier adds: “this innovative and highly diversified approach is built on baskets of stocks, and aims to grow investors’ savings at a pace in line with potential sustainable gains in the world economy. Additionally, the team focuses particularly on risk management across various levels: extent of exposure to high-risk assets, strong portfolio diversification, strict restrictions on company-specific risks, asymmetrical hedging strategies and screening for environmental, social and governance criteria (ESG).”
Lastly, Gustavo Horenstein notes: “Dorval Global Convictions Patrimoine has clearly proven its robust profile, particularly when the Covid-19 crisis dented the world economy. We had to particularly cut back exposure for this fund, in keeping with its cautious approach and SRRI 3 risk indicator, adapting to this unprecedented situation both in terms of the exposure rate by the use of hedging – selling index futures and buying safe haven assets – and investment themes with the sale of the most risky theme-based baskets.”
After three years in existence and successive natural stress tests, Dorval Global Convictions Patrimoine posts compelling results, set against its SRRI 3 risk indicator
The financial markets have been shaken by a series of external shocks since 2018, with US-China tensions, Brexit and of course the Covid-19 pandemic. World economic activity was already slowing swiftly in 2018-2019, and collapsed in 2020, followed by a sharp recovery from the third quarter of 2020, fueled by fiscal and monetary policies of unprecedented proportions worldwide.
These successive natural stress tests prompted the portfolio management team to make decisive investment choices, to both safeguard and subsequently dynamize our clients’ assets:
In the fourth quarter of 2018, China-US tension sent international share indices plunging 18%. Our portfolio managers cut back equity exposure to 7% via the sale of futures on US equities, and increased exposure to sovereign bonds. The fund therefore curbed its losses, shedding just 2% over the period, and gradually accompanied the market recovery in 2019.
In February 2020, the spread of the Covid-19 epidemic triggered a dramatic 34% nosedive for international share indices. We kept the maximum loss on the fund at 7% by drastically pruning our exposure to risky assets during the market tumble and rolling out bond hedging strategies.
In April 2020, monetary and fiscal big guns drove a market recovery: our portfolio management team swiftly upped equity exposure to 20% and subsequently 30% as soon as the launch of vaccines was announced in November. The fund ended the year with a gain of 5%, ranking among the best funds in its category.
By way of reminder: the Global Convictions range has two levels of risk, depending on each investor’s profile.
- Dorval Global Convictions Patrimoine (SRRI 3) with an investment timeframe of 3 years,
- Dorval Global Convictions (SRRI 4) with an investment timeframe of 5 years.
Both funds have proven to be robust, particularly in 2020. Here at Dorval Asset Management, we believe that this range offers a suitable response to the current environment, as economies gradually open up again on the back of vaccination programs and sustainably low interest rates. Dorval Global Convictions Patrimoine and Dorval Global Convictions kicked off the first half of 2021 with a cyclical positioning, while ensuring that we safeguard our extensive geographical and sector diversification.