«Among balanced funds, only Monocle stand out from the crowd.»

Les Echos, 1st French Business Newspaper, November 22d, 2018







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Monocle Fund Part A

May 15, 2020
 YTD:                  -3.72%

Dear Investors,

As of May 15, Monocle (part A) is at -3.72% over 2020.

2019: +6.09%
2018: +0.11%
2017: -1.25%
2016: +6.91%
2015: +7.32%

Our positioning remains substantially the same: a portfolio of stocks that we consider to be good investments, protected by a short position on the US SP500 index, which we believe does not reflect the impact of the pandemic at current levels.

Therefore, if tomorrow morning the world gets scared and the indices fall sharply, we are well protected.

This risk is not small: Fed Chairman Powell's speech on Friday was gloomy, and the Fed Stability Report published just afterwards was even gloomier.

On the good news, the news about vaccines seems a little premature. The latest study cited by journalists as the cause of the market rally at the beginning of the week comes from the startup Moderna. It concerns 45 patients (small sample), aged 18 to 55 years (age group little impacted by COVID) of which only 8 developed the antibodies showing vaccine efficacy. All this seems a little meagre to justify the enthusiasm of the markets, of which we nevertheless know now one beneficiary: Moderna ! After seeing its share price rise 25% on the new one (it had already been multiplied by three since the beginning of the year), it has just announced a capital increase of $1.2 billion. As of last night, Moderna is valued at $27 billion. Sales reached $60M in 2019. Moderna is working on other vaccines. So far, it has not published any scientific studies on any of its work.

Besides, what does the vaccine really change? If they definitely found it now, it would probably not be available before several months. Investment scenarios, even optimistic ones, must therefore include the economic shock seen so far followed by a slow recovery with long-term impacts on the economy and changes in people behaviour. The jobs lost will not be instantly recreated. Corporate debt was high before the crisis compared to earnings, it will be higher tomorrow (companies are borrowing to manage the crisis) on smaller earnings. The current prices therefore seem to reflect only the best possible scenario. It is good to be optimistic and to wish for it, but betting on it is something else.

On the other hand, the Franco-German plan for Europe is excellent news ie Angela Merkel declaration:

"Europe must act united. The nation-state that would like to act alone has no chance of doing so."

The Euro is rising against the USD on this news. This is having a slight impact on the fund but we had hedged part of our exposure to the USD a few weeks ago in this eventuality so the impact remains minor.

Kind regards,


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