XPA Market Update - Maio 2024

XP Private

14 May 202403:14

Summary

TLDRMateus 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.

Outlines

00:00

Portfolio Adjustments and Market Analysis 📈

Mateus Mazão introduces himself as part of the HP advisor team and discusses the strategic portfolio adjustments made during the month. The team finalized investments in pre-committed assets through 2026 and in funds indexed to IRFM for fixed allocations. These investments were made over the past weeks, totaling a 10% increase in the moderate profile portfolio. With the recent correction in the interest rate curve, the team sees a favorable symmetry of gains from current prices. After analyzing economic data and market conditions, they believe there are gains that justify the position in pre-committed assets. The team is now overweight in pre-committed assets. Following the release of economic data, they are more confident that despite some delay in the interest rate cut cycle, the next move should be a drop. They have increased the allocation to inflation-linked fixed income by 5%, with a focus on the duration of the IMAB inflation portion, which now totals 32.5%. They have maintained a conservative strategy with a low risk budget and have found better opportunities to increase risk. The team is underweight in post-committed assets, overweight in pre-committed assets, and also in assets linked to inflation, focusing on the duration of the IMAB. They are neutral in multi-asset and variable income in Brazil. Lastly, they are underweight in global fixed income and variable income. The main contributors were from the post-committed income class, while the main detractors were multi-asset macro and Brazilian income assets.

Mindmap

Keywords

💡HP advisor

HP advisor refers to a team or individual providing advisory services, likely related to financial or investment management. In the context of the video, Mateus Mazão is part of this team, which has been managing and making tactical movements in their portfolios throughout the month.

💡tactical movements

Tactical movements in finance refer to short-term adjustments made to an investment portfolio to take advantage of market conditions or to mitigate risks. The script mentions that the HP advisor team has been making such movements in line with their allocation process, indicating strategic and timely decisions.

💡investment committee

An investment committee is a group responsible for making decisions regarding the investment strategy and management of a portfolio. In the script, Mateus mentions that the changes to the portfolio were made through their investment committee, highlighting the collaborative and structured approach to investment decisions.

💡fixed-income assets

Fixed-income assets are financial instruments that pay out a fixed rate of return over a specified period. The script discusses the finalization of tranches in fixed-income assets, indicating a strategic move to manage the portfolio's risk and return profile.

💡IRFM

IRFM likely refers to a financial index or rate used in Brazil, possibly related to fixed-income investments. The script mentions funds indexed to IRFM, suggesting that these funds are tied to a specific financial benchmark that influences their returns.

💡portfolio allocation

Portfolio allocation is the process of distributing investments across various asset classes to achieve a desired balance of risk and return. The video discusses changes in allocation, such as moving to a 10% position in a moderate profile portfolio, which is a key aspect of their investment strategy.

💡interest rate curve

The interest rate curve is a graphical representation showing the relationship between interest rates and the maturity of debt instruments. The script mentions a recent correction in the interest rate curve, which has increased rates and made risk premiums more attractive, influencing their investment decisions.

💡overweight

In finance, being 'overweight' in an asset or sector means that the investment has a larger proportion of the portfolio than is considered a standard or benchmark. The script indicates that the team is now overweight in fixed-income assets, reflecting a strategic decision based on market analysis.

💡inflation-linked bonds

Inflation-linked bonds are debt securities whose interest payments and principal are adjusted according to inflation rates. The script mentions an increase in allocation to fixed income linked to inflation, specifically focusing on the duration of the IMAB (which could be an acronym for a specific type of inflation-linked bond), as part of their strategic positioning.

💡

💡credit spread

A credit spread is the difference in yield between a corporate bond and a risk-free bond, reflecting the additional yield investors demand for taking on credit risk. The script discusses credit spreads being 'compressed,' which means they have narrowed, indicating a perceived decrease in credit risk or an increase in demand for these assets.

💡risk budget

A risk budget is a strategy that sets a limit on the amount of risk an investment portfolio can take on. The script notes that due to economic uncertainty, they have maintained a low risk budget, adopting a more conservative and gradual approach to increasing risk, which has proven to be appropriate.

💡multi-asset class

A multi-asset class investment strategy involves investing in a variety of asset classes, such as stocks, bonds, and cash, to diversify risk and return. The script indicates a neutral stance in multi-asset classes, suggesting that the portfolio is balanced across different types of investments.

Highlights

Mateus Mazão is part of the HP advisor team and has made tactical movements in their portfolios.

The team has aligned their actions with transparency in the allocation process.

In the last week of the month, they finalized tranches of fixed assets through 2026 and funds indexed to IRFM.

Allocations were made over the last few weeks, now totaling 10% in the moderate profile portfolio.

Due to a recent correction in the interest rate curve, there's increased attractiveness in risk premiums.

The team sees a favorable symmetry of gains from current prices within their probabilistic process.

After analyzing economic data and market conditions, they believe there are already gains justifying the position in fixed assets.

The team is now overweight in fixed assets in the strategic allocation.

Economic data revealed progress in monetary policy, leading to increased confidence.

Despite some delay in the interest rate cut cycle, the team believes the next move should be a drop.

They increased the allocation in fixed income linked to inflation by 5%, with a focus on duration.

The team is now over-allocated in two steps in the class, with both allocations financed through the reduction in post-fixed assets.

There's a low degree of risk budget utilization in portfolios due to observed economic cycle uncertainty.

The conservative strategy of gradual risk increase has proven to be correct.

The team is underweight in post-fixed assets, overweight in pre-fixed assets, and also overweight in inflation-linked assets.

They are neutral in multi-asset and variable income in Brazil.

Underweight positions are held in global fixed income and global variable income.

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

The team thanks the audience and looks forward to the next month.