Executive Summary
There were plenty of events in August which pushed risk appetite backward and forward between pessimism and optimism several times. We maintained our conservative bias, as the delta variant remains the biggest risk for the markets right now. Together with the question of waning vaccine efficacy, this has made the risks to the economic outlook much more pronounced relative to just a few months ago. Furthermore, nervousness about possible tapering by the Fed, along with a potential Chinese growth slowdown have played on investors’ minds and distanced the narrative considerably from the reflation hopes many had back in Q1. The bubble in the US equity market keeps getting bigger, while liquidity continues to deteriorate. We remain concerned that most contrarian technical indicators are pointing to serious overheating of markets, while the S&P 500 keeps attaining new all-time highs. The main story of August was the Chinese regulatory crackdown on China’s internet technology sector. We have used the volatility in Chinese tech stocks as an opportunity to double our positions as we are convinced that it is more a case of focusing on social stability and increasing pay for working people than launching a full-scale attack on money making. The Technology of the Future Fund had a -2.38% return in August, underperforming the benchmark MSCI World Index (USD), which had a return of +2.35% . The main reason for underperformance is that the majority of our positions can be classified as low beta “undiscovered values”: they are still not on the radar of the majority of investors and are not members of any benchmarks.