Investment objectives, strategy and policy
The management of the assets of UG Market Maximum is consistent with the target allocation detailed in the prospectus, namely – up to 80% of assets are invested in high-risk instruments (mainly shares issued by Bulgarian companies, but also shares traded on international regulated markets, rights, derivatives). The remaining assets are intended to provide liquidity and reduce portfolio risk by investing in cash deposits, government securities, corporate bonds and other fixed income instruments. This target allocation is undergoing some modifications due to both the current state of the financial markets (market timing), and medium-term projections of management. Regardless of temporary changes in the allocation, the risk profile of DF South Market Maximum remains typical for a fund investing primarily in equity – namely moderate to high risk.
The proportion of shares in the portfolio at the end of 2015 decreased to 52,10% of the assets, as the decline is almost entirely at the expense of bonds and free funds. Reducing the exposure in stocks reflects our expectations for an uncertain short-term future before new growth of investors’ appetite for risk in the second half of 2016. Our favourite investments are primarily in actively traded instruments (as they comply with the condition to have a fair price significantly higher than the market price), but without neglecting those that are not traded heavily as long as they offer good enough discount from their fair price.
In 2016 our strategy remains moderately aggressive (as far as the mandate of the fund is to invest mainly in shares) without forcing us to be “fully invested” most of the time. Our philosophy of managing the assets of the fund was never to blindly follow the market, but rather to seek value where other investors rarely look.
Although the mandate of the Fund permits a large share of risky assets in the portfolio, over the last six or seven years we have adhered to a more conservative approach to management. That approach was, in certain periods fo time, not the most profitable strategy, but in the long run proved successful in protecting the assets of our investors from much more serious losses.