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Merill Funds 2021 Q4 Commentary
Merill SICAV - 1.02.2022

Merill Funds Update: October to December 2021


Quarterly markets review:

Global equities were stronger in the final quarter of 2021 as investors focused on economic resilience and corporate earnings. In bond markets, government bonds outperformed corporate bonds. Markets began to price a faster pace of interest rate rises in the US.

US equities rose in Q4. Overall gains were robust despite a weaker November, during which fears over rising cases of the Omicron variant of Covid-19 and the speed of the Federal Reserve’s asset tapering had weighed. By year-end, these worries had largely subsided, while data continue to indicate that the economy overall remains stable and corporate earnings are robust. This was still the slowest quarter of growth since the second quarter of 2020, when the economy suffered a historic contraction in the wake of tough mandatory measures to contain the first wave. Unemployment fell to 4.2%, the lowest since February 2020, from 4.6% in October.

Eurozone shares made gains in Q4, as a focus on strong corporate profits and economic resilience offset worries over the new Omicron variant. A number of countries did introduce restrictions on sectors such as travel and hospitality in order to try and reduce the spread of the new variant. The flash composite purchasing managers’ index hit a nine-month low of 53.4 for December, as the service sector was affected by rising Covid cases. However, equity markets drew support from early data indicating a lower risk of severe illness. The quarter was marked by volatile gas prices which contributed to higher inflation. The eurozone’s annual inflation rate reached 4.9% in November, compared to -0.3% a year earlier. The European Central Bank said it would scale back bond purchases but ruled out interest rate rises in 2022.

Markets were buffeted over the quarter by persistent, elevated inflation, hawkish central bank policy shifts and the emergence of the Omicron Covid-19 variant. In bond markets, 10-year government yields were largely unchanged. Yields followed a downward trajectory for most of the quarter before reversing in the final weeks of the year as sentiment improved. Yield curves flattened, with shorter-dated bonds hit as central banks turned more hawkish.


Merill Total Return Income Fund

           Share Class                                     31/12/2021                 30/09/2021
           Accumulator (EUR)                              0.5787                        0.5749
           Distributor (EUR)                                  0.5362                        0.5337

As at 31 December 2021, the fund had €41.97 million in assets under management. The fund generated another positive quarter, which was due to the asset allocation in place. Compared to the previous quarter, we retained a similar asset allocation weighting and therefore, kept an underweight position in government bonds, which are very sensitive to interest rate risk. In this quarter investment in the equity portion remained the main contributor towards the positive return.


Merill High Income Fund

           Share Class                                    31/12/2021                 30/09/2021
           Accumulator (EUR)                              0.5381                       0.5387
           I Distributor (EUR)                                0.4634                       0.4675
           C Distributor Inc (EUR)                         0.4957                          NA
           GBP Hedged Distributor (GBP)            0.5034                       0.5082

As at 31 December 2021, the fund had €65.60 million assets under management. During this quarter, we increased our equity and high yield debt exposure and continued with our gradual reduction in investment grade bonds. The latter were reduced to improve the yield and mitigate interest rate risk.   Once again, the Fund’s underlying equity exposure produced the lion's share of the positive return.


Merill Global Equity Income Fund

           Share Class                                    31/12/2021                 30/09/2021
           Accumulator (EUR)                              0.6393                       0.6063
           Distributor (EUR)                                  0.6199                       0.5879
As at 31 December 2021, the fund had €20.62 million assets under management. The fund registered another strong quarter. The main two sectors contributing to the upside were materials and healthcare. During this quarter we continued to add to selective equities mainly in big pharma, financials and information technology. Also during this time, we have increased our cash position to be prepared to capture opportunities in the year 2022.


Merill Strategic Balanced Fund

           Share Class                                    31/12/2021                 30/09/2021
           Accumulator (USD)                             1.0360                        1.0191

As at 31 December 2021, the fund had $30.04 million assets under management. In this quarter, we continued to add to our equity and high yield bond allocation. Within the equity exposure, we increased  the financial and healthcare sector and took  some profits on holdings within the information technology sector.. In the bond universe, we crystallized gains on a number of bonds which were paying a low yield and used the proceeds to enter into higher yielding bonds. The rationale for the latter shift was aimed to mitigate interest rate risk. 

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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