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Merill Funds 2020 Q1 Commentary
Merill SICAV - 29.04.2020

Merill Funds Update: January to March 2020

Quarterly markets review:

This first quarter of the upcoming decade has been marred by the global pandemic of coronavirus which, originated from the distant city of Wuhan in Hubei province, China and spread rapidly across the globe at such speed that it profoundly affected global markets. Equities suffered steep declines and government bond yields fell as investors favoured their perceived safety. The global impact was so severe that even gold prices took a dive as investors were forced to liquidate to cover their losses. Shares fell across developed markets as coronavirus spread forced countries into lockdown to try to contain the outbreak. Governments across the globe implemented record-breaking fiscal stimuli to assist individuals and businesses weather this difficult period whilst central banks loosened monetary policy to inject liquidity in their respective economies and reducing borrowing costs. The global economic contraction resulting from the coronavirus has resulted in an increasingly bearish outlook as most industry sectors struggle to meet profit targets. This is resulting in an increase in unemployment and is pushing global economies to the brink of a recession.

In the Eurozone, the already weak economic growth was severely hit as a pan-european lockdown was implemented albeit with differing levels of restrictions and urgency. Forward-looking indicators showed how economic activity has collapsed. The flash Markit composite purchasing managers’ index (PMI) for March fell to a record low of 31.4, compared to 51.6 in February. The PMI survey covers companies in both the services and manufacturing sectors, and an index reading below 50 indicates economic contraction. The European Central Bank announced the Pandemic Emergency Purchase Programme (PEPP) – a €750 billion scheme. The PEPP will fund the purchase of government and corporate bonds until the end of the Covid-19 crisis.

In the US, over a three-week period in March the number of confirmed case rose from 150 to over 100,000 and as the country started to lockdown, jobless claims rocketed by over three million. The Federal Reserve cut interest rates twice in March for the first time since the global financial crisis and announced unlimited quantitative easing (buying bonds). US interest rates now stand at 0-0.25%. The US Senate also passed a $2 trillion stimulus package. The proposed package includes $250 billion worth of direct payments to households, $500 billion for loans to distressed companies and $350 billion for small business loans.

Markets saw extreme declines and volatility in March. US stock market trading was temporarily suspended on a number of occasions due to the size of daily moves and, for several days. Oil and gas was the worst performing industry groups over the period, selling off on concerns about falling demand in the wake of the virus, as well as the failure of negotiations between OPEC (the Organisation of the Petroleum-Exporting Countries) and Russia to control the global supply of oil.


Merill Total Return Income Fund                

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As at 31Mar 2020, the fund had €34.17million in assets under management. Despite the fund being in a defensive mode since Q4 of 2019, with the outbreak ofthe Covid-19 we have increased our cash positions, retained the sovereign bondexposure, as they tend to do well in bearish markets and favoured high quality investment grade bonds with short maturities to avoid duration risk, an aim to preserve capital over yield. The chosen strategy worked well given that the fund outperformed its reference index by 1.21% during the period. The latter proved to be beneficial as the fund performed relatively well when compared to the market and experienced a strong recovery by the time of writing.


Merill High Income Fund

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GBP Hedged Distributor










As at 31Mar 2020, the fund had €45.65million assets under management. During this difficult environment our target is to preserve capital. The fund was already placed in higher quality high yield debt favouring BB versus lower rated bonds. We have increasingly reduced riskier assets and increased our exposure to Investment grade bonds thus reducing the market risk of the high yield market which, has allowed the fund to fare better relative to the European high yield market. With the encouraging support from Central banks and fiscal stimulus packages which brought stability in the bond market created buying opportunities coupled with cheap valuations. At the time of writing the performance of the fund has since recovered from its lows as the demand for high yield bonds have increased considerably.


Merill Global Equity Income Fund

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As at 31Mar 2020, the fund had €10.67million assets under management. During this lock-down we have increased our cash position to over 10% at the time of writing in order to protect the fund’s assets from the downside risk and to capture buying opportunities when these emerge. Thanks to our active management coupled with a defensive and prudent stance taken at the beginning of the year, the cash available is now being deployed in very selective sectors such as technology, telecommunication and Healthcare sector at very attractive levels.


Merill Strategic Balanced Fund

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Accumulator (USD)







As at 31Mar 2020, the fund had $23 million assets under management. In the initial stages of the strategy build-up, we favoured AAA fixed income securities such as US treasuries and Government of Norway, and bought very selectively quality high yield bonds. We remained underweight equities and overweight cash. We have increased our cash position at the upper limit and are favouring very good quality investment grade bonds with short maturity.



This document is issued by Jesmond Mizzi Financial Advisors Limited (JMFA) as Managers of Merill SICAV plc. JMFA (IS30176) of 67, Level 3, South street, Valletta, VLT 1105 is licensed to conduct investment services business under the Investments Services Act by the MFSA of Triq l-Imdina, Zone 1, Central Business District, Birkirkara, Malta and is a member firm of the Malta Stock Exchange. Merill SICAV plc is incorporated and licenced as an open ended collective investment scheme, registered in Malta, qualifying as a Maltese UCITS with effect from the 16th October 2015. This document does not intend to give investment advice and the contents therein should not be construed as such. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this document. Past performance is no guide to future performance and the value of investments may fall as well as rise





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