After a subdued start in January, the equity markets continued their upward trend from last year in Q1 2021. The MSCI World (in CHF) gained more than 11%. In particular, March showed a very strong performance. Side noises such as rising interest rates or hedge fund bankruptcies did not have much impact on the overall market, while positive economic data and further economic stimulus packages worth billions were very well received. This price fireworks was accompanied by diminishing risk indicators.
In this market environment, risk-based strategies usually underperform the capital-weighted benchmark. This was also the case in Q1. Our Equity World funds lagged the benchmark, especially in February, but regained ground in March. Technology growth stocks, which dominated the market in 2020, were less in demand - positive for our approach, which tends to favor other characteristics.
In Q1, however, foreign currencies also had an important say. Almost all major currencies gained significantly against the CHF. Our significant underweight in the US market also meant that we were less able to benefit from the strengthening USD. However, as other overweighted currencies (e.g. CAD, AUD, GBP) also gained, this effect was not as significant in the final accounts. The fund classes without currency hedging also performed significantly better in Q1 than their counterparts with hedging due to the depreciation of the CHF.