Investing in govies today

The year 2008 proved to be the year of all the dangers and of all fears.

First of all, the firmness of the emerging countries supported and stimulated the demand for basic materials and made the inflationary risk re-appear. In this context, the European Central Bank (ECB) decided to increase the interest rates up to 4.25% in July.

Then, the generalisation took place  :
- Worsening of economic conditions, systematic crisis realised by the bankruptcy of Lehman Brothers, the close bankruptcy of AIG, etc.
- The ECB brought back its rates from 4.25% to 2.50% in one single quarter. We do anticipate further drops in 2009.


Concerning the governments, after the support plans of the banks, the majority of the countries intervened to support the markets of the goods and services. The central banks understood the seriousness of the situation and acted as well on the rates as on the interbank markets liquidity.

During the year the portfolio prioritized the liquidity by buying future contracts (Bobl) and an overweight in German titles.

The fund benefited from this strategy: doubling the modified duration compared to the benchmark.


In 2009 the management team foresee that the ECB will lower the interest rates again. Will we see a Japanese style rate curve? No one knows yet, but it is still a possible scenario, realistic enough not to turn your back to Government Bonds...

 

More about NOAM Taux Euro

 

 

 

Lipper Award for Xavier Chapon


Xavier Chapon, also Fund Manager of NOAM Taux Convergences, received a LIPPER Fund Award (Emerging Markets Bond – Europe - 3 years) for this fund .

The Fund has been managed by Xavier since its inception in 2000. NOAM Taux Convergence ranks first in its category acknowledging the excellent risk/ return ratio it obtained compared to its peers. NOAM Taux Convergences generated a performance of +12% with a volatility of 5.2%* on a 3 years basis.

NOAM Taux Convergences is mainly invested in government bonds paying fixed or variable interest rates of countries exposed to European convergence. The portfolio’s modified duration is adjusted regarding expected changes in the yield curves of these countries.

Since its creation, the Fund evolves on the European construction theme and has a focus on Eastern European countries in the more recent period. It is very well possible that the Fund Manager continues to focus on these countries in order to capture the interesting widening of spreads in this area.

Lipper, a Reuters company, is a global leader in supplying mutual fund information, analytical tools and commentary. The Lipper Fund Awards that recently held their 6th edition, selects and rewards the best funds per category that offer investors the best ratio of risk and volatility. This French version of the Lipper Funds Awards is part of an award that is given in 21 countries. They reward the funds selected amongst 130000 funds in the world on a yearly basis by Lipper.

*As at 31/12/08, versus a performance of its benchmark Euro MTS that showed a performance of 10.6% and a volatility of 4.1%.