Performance Commentary

Equity World

As at the beginning of Q3, hopes that the central banks would deviate from their path of interest rate hikes were the driving force behind the significant recovery on the global equity markets in Q4. However, the central banks put an end to this in December with further (albeit no longer quite so large) interest rate hikes and once again reaffirmed their determination to continue to fight inflation vehemently. Investors reacted in a huff and prices slid again.

The relative performance of our risk-based strategies behaved in line with expectations during this contrasting quarter. In October and November, with rising prices and declining market risks, our funds fell behind their benchmarks. However, in the negative December environment, all strategies recovered the shortfall and even exited the quarter ahead of benchmark. Just as in Q3, currencies had a large impact on the relative performance of non-hedged fund classes in Q4 - this time just the opposite. The underweight in USD delivered a large positive performance contribution in Q4.

Looking at the full year 2022, our Developed Market funds met expectations. With risk-optimized stock selection, they were able to reduce both volatility and drawdown in a negative year and close ahead of their benchmarks.

Equity Emerging Markets ex China

The emerging markets also made clear gains up to the end of November and trended somewhat weaker in December. The Turkish stock market was one of the biggest winners in Q4. In contrast to the rest of the world, Turkey is easing its monetary policy to stimulate the economy despite high inflation. Numerous Eastern European markets also recovered significantly after being among the big losers with the Russian invasion of Ukraine.

As expected, our fund did not quite keep pace with the benchmark during the upward phase. In the more volatile month of December, it was able to narrow the gap somewhat and end the quarter with a slight underperformance. For 2022, however, a clear outperformance resulted in a clearly negative market environment.

Equity Switzerland

In line with the global trend, the Swiss stock market also rose and held up relatively well in December. In this overall positive market environment, our fund could not quite keep up with the SPI. One of the main reasons in Q4 was the stock selection within the industrial sector. We also underperformed for the entire negative 2022. In particular, our overweight in mid caps and the industrial sector as well as the structural underweight in the defensive index heavyweights (first and foremost Novartis) weighed on performance.

Equity Europe ex Switzerland

Europe's stock markets recovered from price losses in October and November. In contrast to the USA, the corporate landscape on this side of the Atlantic is less technology-heavy. As a result, Europe's equities held up relatively well in the otherwise rather negative month of December. As expected, our risk-optimized fund was unable to keep pace with the capital-weighted index during the strong upward phase and was also unable to make up the shortfall in December, which was only slightly negative. Despite negative markets, we unfortunately underperformed for the whole of 2022 as well. In contrast to Developed Market equities, we were not able to benefit from an underweight in highly volatile technology companies in this universe. In addition, the significant underweight in the energy sector also weighed on performance.

Equity China

Once again, the Chinese equity market behaved somewhat contrary to the rest of the world. It continued to decline in October and then began a major recovery at the beginning of November. The reason for the price advances was the Chinese government's radical departure from its zero-covid policy. Our fund was able to limit losses very sharply in October, but lost ground again during the strong upward phase and ended the quarter virtually on a par with the benchmark. Over the full year, the risk-based strategy held up very well in a strongly negative and volatile environment and significantly reduced the drawdown compared to the index.

Foreign currency bonds (CHF hedged)

Interest rate developments in Q4 were divided. In the first two months, interest rates eased in the hope of a more dovish monetary policy, and the bond markets recovered somewhat from the large price losses of the first nine months. By December, however, this hope had faded and the yield curves shifted upward again. Over the quarter, rates rose most significantly in the eurozone (underweight) and fell in the SGD and GBP (both overweight). This resulted in an outperformance for our two government bond funds. Looking at the year as a whole, the Mid Term fund outperformed (thanks to a shorter duration compared to the index), while the Long Term closed at benchmark level.

Bonds CHF

Until mid-December, CHF interest rates eased somewhat, which was reflected in a positive price performance. Until then, our Bond CHF fund was roughly on par with the market index. In the slipstream of the major central banks, the SNB then also raised its key interest rate by a further 0.5%. Accordingly, CHF interest rates rose again - most noticeably in the maturity range of 6-8 years. The duration of the market index is exactly in this window, that of our fund below - an outperformance was the result, both for Q4 and for the whole of 2022.

Mixed fund Smart Invest 65

Our balanced fund with 65% equities was able to benefit from the general market recovery in October and November and at the same time significantly reduce losses compared to the benchmark (with 40% equities) in December. In the process, it was able to close both the quarter and 2022 with an outperformance.

Mixed fund Smart Invest Dynamic

The equity allocation of our balanced fund with dynamic asset allocation increased from around 30% to 60% (rest in cash) in Q4 given the positive market environment, which did not yet have a beneficial effect on overall performance in negative December. Shortly before the end of the year, the equity ratio was reduced again to around one-third.