Blue’s News & Views: 2016 Brexit edition.

 In Petrus portfolio

Brussels, the 28th of June 2016.


Hello Associated Investors and Friends,

The Blue Fund’s total Net Asset Value (NAV), based on the 24th of June’s closing prices stands at 189M €.

The NAV per share stands at 146,54 €, up from 100 € at inception on the 26th of October 2012 (3 years and 8 months ago).

2012 Return:       1,81%  (Nov & Dec 2012 only)
2013 Return:   17,41%
2014 Return:   15,53%
2015 Return:     8,69%

2016 Return:    -2,35%   (This includes price action from the first day after the Brexit vote !)

Past performance is never a guarantee for future performance; volatility and negative returns will inevitably be part of the story.

The fund’s current asset allocation:  27% Bonds  3% Cash        70% Equities.

Blue’s direct currency exposure is:  63% Usd 1,5% Mxn        27,5% Eur  4% Swf   3% Aud 1% Hkd

You can find The Blue Global Fund Sicav-Sif (BLUGLOB:LX) on Bloomberg: http://www.bloomberg.com/quote/BLUGLOB:LX

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So the Older, non-London English want OUT, the Young, the Londoners, the Scots and the Northern-Irish want to stay IN. What a mess !
A majority of British People have decided that the best way to tackle the global challenges it is facing, is to get out of the world’s largest trading block.
This doesn’t sound like a great idea.
 
The Brexit vote is undoubtedly an event of political significance for all the parties involved and in a global interconnected world, everybody is more or less concerned by the still unknown consequences.
 
Most Concerned: for the UK the impact is likely to be significant, with the potential break-up of the UK (Scotland and Northern-Ireland opting to stay IN) as a mind-boggling prospect. Imagine England going from the world’s superpower 200 years ago to a small independent but rather insignificant country at the outskirts of the world’s largest trading area ??
 
Very Concerned: for the EU the impact is significant too; it loses an important free-market voice, and a reliable ally (they liberated us from totalitarism !!) with important military power.
On the other hand this rebutal might be a blessing in disguise, the EU needs to clarify its goals, its means and its modus operandus. The EU needs more democracy and greater efficiency !
We do NOT think other countries are likely to get out of the EU and even less out of the EURO-zone (if only we could get Greece out, that would be good news). 
 
Both the UK and the EU are now likely to spend a enormous amount of time, energy and money, discussing how to disentangle what has been built over the years. What a waste !
We think cool heads (The Germans) will prevail and that negotiations will NOT result in a mutually destructive trade war. Punishing the UK for leaving us is certainly not a great idea either.
On the contrary, we have to build a partnership with the UK which is as close to a union as possible without actually being called one.
 
Concerned, but not overly so: of course the US is concerned too, but from a distance. It obviously wants its allies and clients to stay good friends.
 
Not very concerned: Asia and the rest of the World although they politely say they are.
 
 
Before the vote actually took place, and also now 4 days after the vote has taken place, we think their is a fair dose of hysteria with regards to the economic and financial impact of a potential (still not a 100% certainty) Brexit one or two years down the road.
Of course, the 15% decline in the GBP over the last 12 months, represents an immediate loss of wealth for the British people.     
We think the negative scenarios of immediate recession, deflation/inflation, soaring unemployment, plummeting house prices, etc … will prove to be greatly exaggerated. Time will tell.
 
BLUE FUND has ZERO direct exposure to the GBP, ZERO direct exposure to UK companies, ZERO exposure to European financials (down 10% to 30% in 2 trading days !!).
BLUE FUND’s portfolio companies have of course indirect exposure to the UK, through sales, production, profits …
BLUE FUND has 70% direct exposure to non-GBP and non-Euro currencies, essentially the USD. 
=> No reason to panic, Blue stays the course !
Have a good summer !
           Ivan Nyssen
CIO & Director The Blue Fund
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