As at the end of May 2021, the Fund’s share price has appreciated by 367%, which means that since its launch date, the Fund has returned over 6% p.a. to its investors. The Fund has over time supported locally listed companies, most on their first public offering of equity or bond launch and is relatively still very popular with investors. Today the Vilhena Maltese Opportunities Fund has a fund size in excess of €25 million. 

Over these 25 years since its inception, the Fund endured several challenges and opportunities ranging from the 2008 financial crisis, 2012 sovereign crisis and more recently, the COVID-19 pandemic, which arguably presented the biggest challenge over the 25-year span. However, every challenge presents an opportunity and the Fund focuses on seizing them. In order to identify the growth potential that exists within locally listed companies, the Fund Manager meets with senior management and analyses in depth the fundamentals and accounting information. Additionally, the Fund also looks at the valuation metrics to ensure that the Fund invests in opportunities that are attractive.

To further maximise its shareholders’ returns the Manager looks at the macroenvironment, that is, the Maltese economy. During the recent global coronavirus crisis, most sectors were impacted, particularly tourism. Our strategy during the pandemic was to avoid those sectors that were severely impacted, whilst focusing on those which benefitted from increased demand. We try to invest in opportunities that would maximise returns during a particular economic cycle.

As the local investor is very dividend and income oriented and the Fund provides the perfect blend in receiving dividend and income payments, whilst achieving capital appreciation. During the pandemic, several Maltese companies opted not to distribute a dividend given the detrimental impact that the pandemic had on their profitability. Additionally, banks and insurance companies were restricted from distributing dividends. However, as Malta’s economic recovery is slowly underway, dividend is expected to resume gradually, which would be an added return to the Fund’s shareholders.

Additionally, despite the Fund’s bias towards local securities, it also provides a small exposure to foreign securities. This provides the investor with a platform to take advantage of any momentum in global markets, like in recent months, whereby global markets started recovering before the local equity market.

Based on the latest International Monetary Fund forecasts, the international and local economies are expected to grow and therefore encouraging further investments. As the Maltese equity market is considered to be cyclical in nature, meaning that it tends to do well when the economy is improving and Malta’s economy is expected to rebound by 4.6%, one of the highest GDP growth rates in the Euro Area. In fact, 74% of companies listed on the Malta Stock Exchange are cyclical compared to the circa 55% of the European Index. This shows that as economies are gradually recovering, the Maltese equity market is expected to keep improving.

We took a defensive stance during the pandemic that is preferring non-cyclical securities. However, as the first signs of recovery started to intensify, the Fund started shifting its exposure to the cyclical side of the market, whilst also taking advantage of the attractive valuations that existed within these securities.

Looking back, 25 years ago few people would have thought the world would evolve the way it has, where technology has become such an important part of our everyday lives. Customer preferences have shifted as products and innovations evolved making our lives easier.
History has taught us that the world is constantly evolving, and it is up to us to adapt, by picking those stocks that offer the best growth potential and maximise shareholder returns. In addition, although it is almost impossible to time the market, the Fund tries to anticipate the market and invest in those securities that are considered attractive from a risk-reward perspective.

Additionally, similar to the strong rally that technology stocks had over the past decade, the Fund tries to identify those industries that would be considered as long-term winners. In fact, companies that are considered to be ESG (Environment, Social and Governance) friendly are touted to be amongst the future winners given the greener push being imposed by world leaders.

As previously mentioned, the economic cycle is also an important part to the success of the Fund in the upcoming 25 years. It is imperative that the Fund monitors and adapts to the economic cycle as several opportunities might arise during a particular cycle.   The evolution of the Maltese market would be another important contribution to the success of the Fund.

This article was first published on the Sunday Times of Malta on the 7th June 2021.  It was written by Stephen Sammut,  an Investment Specialist at BOV Asset Management Limited (“the Company”). 

The writer and the Company have obtained the information contained in this document from sources they believe to be reliable, but they have not independently verified the information contained herein and therefore its accuracy cannot be guaranteed. The writer and the Company make no guarantees, representations or warranties and accept no responsibility or liability as to the accuracy or completeness of the information contained in this document. They have no obligation to update, modify or amend this article or to otherwise notify a reader thereof in the event that any matter stated therein, or any opinion, projection, forecast or estimate set for the herein changes or subsequently becomes inaccurate. BOV Asset Management Limited is licensed to conduct investment services in Malta by the Malta Financial Services Authority.  Issued by BOV Asset Management Limited, registered address 58, Triq San Zakkarija, Il-Belt Valletta, VLT 1130, Malta. Tel: 2122 7311, Fax: 2275 5661, E-mail: [email protected], Website: www.bovassetmanagement.com. Source: BOV Asset Management Limited.