What was your management strategy in 2010?

Before coming to our management strategy in 2010, let’s take a look in the mirror to remember that the last three years have been among the worst period in market history, with a precipitous drop between mid-2007 and the first quarter of 2009 before a dramatic rebound, then followed by a period of relative stability that is now ongoing since September 2009, when the market fluctuates around 3750 points. In total, we had a motion resembling a square root. And we are still currently in its tail, a period that can last longer or shorter according to historical periods. Thus, such a period of stability had lasted about one year in 2004 but almost seven years between 1975 and 1982. As we can see, it is difficult to classify this type of figures to draw a lesson for today.

The only thing that is certain is that 2010 was marked with the seal of fall since we started the year at 3,936.33 points to arrive on December 31st to 3,804.78 points on the CAC 40, i.e. a decline of 3.34%. The average major world financial stock markets remained, meanwhile, virtually unchanged (+ 0.53%) with a fairly wide dispersion, however, since the Chinese market, yet praised by more than a management company, felt by 14.31%, followed distantly by European stocks (- 5.85%), major French stocks, large Japanese stocks (- 3.01%), also recommended by many strategists. Only two major markets got out while the going is good: the broad U.S. index (+ 12.78%) and especially the growth stocks index (+ 16.91%).

It should be noted that volatility has continued to take its toll as the market has actually fluctuated more than it has stabilized, the CAC 40 Index being located between a low of around 3,300 points and just over 4,000 points. Faced with such a situation our management has essentially been to navigate visually to capture most of increase phases while not losing too much during phases of decline, while being 100% invested as is our management method.

We have essentially turned the portfolios toward "UFO" (Unidentified Financial Objects) or, in other words towards hybrid funds somehow able to behave exactly upward without undergoing most of the cuts.

This strategy paid off because our portfolios have continued to outperform the market. As of Decembre 31st, the Adéquation Finance European Equities Portfolio displayed a performance of 8.36% while the CAC 40 decreased at the same time by 3.34%, i.e. an outperformance of 11.70%. At the same time, the Adéquation Finance International Equities Portfolio settled up 13.58% while its benchmark (1/3 S & P500, 1/3 Euro Stoxx 50, 1/3 CAC 40) declined by 2.03%, showing an outperformance of 15.61%.

In total, the Adéquation Finance European Equities Portfolio rosed by 48.85% since December 31, 1999, at the same time the CAC 40 experienced a decline of 3.81%, i.e. an outperformance of 52.66% and an average annualized outperformance of 5.66%.

In the same vein, the Adéquation Finance International Equities Portfolio rose by 2.67% since December 31, 2005 while its benchmark declined 9.17%, i.e. an outperformance of 11.85% and an average annualized outperformance of 1,18%.

Is it wise to invest now?

We are invested at any time at 100%. It is impossible to predict or anticipate, nor the size nor the precise date of onset of a downtrend or a market correction. The last three years are there to prove it.

The risk is not so much to be invested and undergo a period of decline that to exit the market amiss and then not take advantage of a rebound phase.

In addition, if we are 100% invested, we strive to balance our portfolio and manage it in real time by optimizing the allocation of funds and the balance between defensive funds and aggressive funds.

The stock market must be considered as a medium to long term investment. If stocks can timely face corrections, they remain on the long term, the asset class whose performance is the best among all assets.

As of December 31st, 2010, over 23 years ranging from its inception to today (12/31/1987 to 12/31/2010), the average return of CAC40 has been 5.98 % per annum, a return that rises to 8.38% per annum if we consider total return.

An investor who placed Euros 100,000 when the CAC 40 was launched would have recovered Euros 380,478 at December 31st, 2010 and Euros 636,457 total return.