XPA Market Update - Maio 2024

Summary

Mateus Mazão, part of the HP advisor team, discusses tactical portfolio movements in line with their allocation process. They finalized the allocation of fixed assets through 2026 and funds indexed to IRFM (an inflation-linked index), totaling 10% of the moderate profile portfolio. Following a recent interest rate correction, they see a favorable symmetry for gains from current prices, leading to an overweight position in fixed assets. After economic data showed progress in monetary policy, they increased the allocation in inflation-linked fixed income by 5%, now totaling 32.5%, focusing on the duration of the IMAB (Inflation-Indexed Bond) segment. They are overweight in two steps in the class, financed by reducing post-dated assets and high-grade credit assets, which have compressed credit risk spreads. With economic uncertainty, they have maintained a conservative risk budget strategy. They are underweight in post-dated assets, overweight in pre-dated assets and inflation-linked assets, neutral in multi-asset and variable income Brazil. The main contributors were post-dated fixed income, while the detractors were macro multi-asset and variable income Brazil assets. They are underweight in global fixed and variable income.

Takeaways

• 📈 The HP advisor team, including Mateus Mazão, made tactical movements in their portfolios throughout the month.
• 🔄 They finalized the allocation of pre-specified assets through 2026 and funds indexed to IRFM (a Brazilian inflation index).
• 💹 There was a 10% increase in the portfolio for a moderate profile, reflecting a recent correction in the interest rate curve.
• 📉 The team sees a favorable symmetry of gains from current prices due to the increased attractiveness in risk premiums.
• 📈 They are now overweight in pre-specified assets in the strategic allocation process, considering the potential scenarios of monetary policy and economic data.
• 📉 After the release of economic data showing progress in monetary policy, they are more confident about the restrictive level of global interest rates and the next move being a decrease.
• 🔺 They increased the allocation in fixed income linked to inflation by 5%, focusing on the duration of the IMAB (a Brazilian inflation-linked bond), bringing the total to 32.5%.
• 📉 They are underweight in post-specified assets and have reduced assets in high-grade credit and cash equivalents due to compressed credit risk spreads.
• 🚨 The team has maintained a low risk budget utilization in portfolios, adopting a more conservative and gradual approach to increasing risk.
• 🔄 Recent market downturns have provided better opportunities to increase risk, proving their conservative strategy to be correct.
• 🌐 They are underweight in global fixed income and global variable income, with the main contributors being post-fixed income assets and the main detractors being macro multi-asset and Brazilian variable income assets.

Q & A

What is the name of the person who is part of the HP advisor team?

The person's name is Mateus Mazão.

What did the team at HP advisor do during the month?

The team carried out several tactical movements in their portfolios, in line with their transparent allocation process.

What changes were made in the portfolio at the end of the month?

They finalized the tranches in fixed-income assets through 2026 and in IRFM-indexed funds, and these allocations were made over the last few weeks, totaling 10% in the moderate profile portfolio.

Why did they increase the allocation to fixed-income assets?

Due to the recent correction in the interest rate curve, which increased rates and made risk premiums more attractive, they saw a favorable symmetry for gains from current prices.

What is the current stance on fixed-income assets in the strategic allocation?

They are now overweight in fixed-income assets.

What economic data influenced their confidence in the progress of monetary policy?

Data that showed progress in the labor market and the convergence of inflation towards targets.

What was the increase in the allocation to inflation-linked fixed-income assets?

They increased the allocation by 5%, with a focus on the duration of the IMAB inflation portion.

What is the total allocation to inflation-linked fixed-income assets after the increase?

The total allocation is now 32.5%.

How did they finance the increased allocations to fixed-income assets?

They financed it by reducing assets in post-fixed income, cash, and high-grade credit assets that already had compressed credit risk spreads.

What is their current stance on post-fixed income assets and multi-asset classes?

They are underweight in post-fixed income assets and neutral in multi-asset classes.

What was the performance of global fixed-income and variable-income assets in the month?

They are underweight in global fixed-income and underweight in global variable-income assets.

What were the main contributors and detractors to the portfolio's performance for the month?

The main contributors were from the fixed-income post-fixed class, while the main detractors were macro multi-asset classes and Brazilian variable-income assets.