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Merill Funds 2020 Q4 Commentary
Merill SICAV - 27.01.2021

Merill Funds Update: October to December 2020

Quarterly markets review:

Global equity markets performed well, as a number of vaccine breakthroughs fostered hopes of a return to economic normality notwithstanding the broad re-imposition of Covid-19 related lockdowns. Government bond performance was mixed, with US yields rising (meaning prices fell). Corporate bonds gained ground.

US equities gained over the quarter, with November especially strong due to the vaccine news. The developments eclipsed Joe Biden’s win in the US presidential election, as well as a $900 billion stimulus package announced in late December. The Federal Reserve nonetheless reinforced its supportive message, stating it will continue with current levels of quantitative easing. Economically sensitive sectors made the strongest gains, with more defensive sectors making more modest progress.

European equities gained sharply in Q4, again on the news of effective vaccines. Sectors that had previously suffered most severely from the pandemic, such as energy and financials, were the top gainers. However, rising Covid infections saw many European countries tighten restrictions. EU leaders approved the landmark €1.8 trillion budget package, including the €750 billion recovery fund, after overcoming opposition from Hungary and Poland. The EU agreed a Brexit trade deal with the UK.

Government bond yields diverged markedly. The US 10-year yield was 25 basis points (bps) higher, finishing at 0.91%, while the German 10-year yield fell by 5bps to -0.57%. Italian and Spanish 10-year yields saw significant declines of 32 and 20bps respectively, as the European Central Bank increased quantitative easing. The UK 10-year yield was little changed at 0.20%, as vaccine optimism was tempered by Brexit uncertainty and new lockdown measures.

Corporate bonds enjoyed a fruitful quarter, outpacing government bonds, with both investment grade and high yield delivering strong positive total returns. Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade.

 

Merill Total Return Income Fund

 

Share Class

31/12/2020

30/09/2020

Accumulator (EUR)

0.5577

0.5400

Distributor (EUR)

0.5218

0.505

 

 

 

 

 

As at 31 December 2020, the fund had €39.21 million in assets under management. In this quarter, we continued with our deployment of cash into equities and investment-grade corporate bonds. We also switched some negative-yielding sovereign debt thus, realizing the profit. The latter proceeds were placed in investment-grade corporate bonds. The fund’s positioning of being underweight sovereign bonds, overweight corporate bonds, and equities allowed the fund to capture the positive rally. The latter contributed to a healthy positive return for the last quarter of the year 2020.

 

Merill High Income Fund

Share Class

31/12/2020

30/09/2020

Accumulator (EUR)

0.5199

0.4962

Distributor (EUR)

0.4619

0.4444

GBP Hedged Distributor (GBP)

0.5020

0.4834

 

 

 

 

 

 

As at 31 December 2020, the fund had €55.17 million assets under management. Whilst retaining a balance between preservation of capital and an attractive income yield we kept on adding selectively in the high yield bonds and investment grade corporate bonds with an attractive yield. The Fund’s underlying high yield bonds and equity exposure produced the lion's share of the positive return. The cyclical stocks held in this fund were the clear winners after the positive news about the effectiveness of the vaccine. 

 

Merill Global Equity Income Fund

Share Class

31/12/2020

30/09/2020

Accumulator (EUR)

0.5395

0.5026

Distributor (EUR)

0.5261

0.4904

 

 

 

 

As at 31 December 2020, the fund had €14.14 million assets under management. The fund’s rebound was more pronounced this quarter after the news of the effectiveness of the vaccine. As opposed to the previous quarter European equities and local equities contributed to the positive performance.  Most of the sectors ended in positive territory for the quarter however the main sector contributing to the upside was the cyclical one.  During this quarter we continued to add in selective equities namely in industries that retain an edge in this environment such as info technology, we have also increased our exposure to Asia as clearly the impact of COVID-19 was better managed. We have also continued to increase those sectors with an ESG focus..

 

Merill Strategic Balanced Fund

Share Class

31/12/2020

30/09/2020

Accumulator (USD)

1.0403

1.0163

 

 

 

As at 31 December 2020, the fund had $29.83 million assets under management. This quarter has been more of a continuation of what we started in Q3 were we have increased our global equity exposure and favoured sectors such as info technology, data centres and gold miners whilst retaining a good balance between AAA securities and good quality high yield bonds. From a duration perspective we have reduced sovereign duration risk by shifting towards better yielding investment grade corporate bonds and high yield bonds. The main performance  contributors of this fund were the high  yield and emerging market bonds followed by European equities.

 

This document is issued by Jesmond Mizzi Financial Advisors Limited (JMFA) as Managers of Merill SICAV plc. JMFA (IS30176) of 67, Level 3, South street, Valletta, VLT 1105 is licensed to conduct investment services business under the Investments Services Act by the MFSA of Triq l-Imdina, Zone 1, Central Business District, Birkirkara, Malta and is a member firm of the Malta Stock Exchange. Merill SICAV plc is incorporated and licenced as an open ended collective investment scheme, registered in Malta, qualifying as a Maltese UCITS with effect from the 16th October 2015. This document does not intend to give investment advice and the contents therein should not be construed as such. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this document. Past performance is no guide to future performance and the value of investments may fall as well as rise.

 

 

 


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