Monthly Letter August 2015

Almost every year the EuroSTOXX50 has a 10% correc on at some point during the year. There is, of course, always a good reason for the correc on. This me around the investment community is worried about global growth and the consequences for corporate pro ts. We are of the opinion that this is the same type of wobble that we tend to see with irregular intervals. We have started to see downgrades to global GDP es mates and we are pre y certain that downgrades of earnings es mates will follow. As long as it doesn’t get worse than this, the downturn in the equity markets will not be prolonged and deep.

The real worry is if we come to a point where a world that thrives on increased leverage (the global debt level is up by c40% between 2007 and 2014 according to a McKinsey study) and low interest rates, will lose con dence in economic growth. On a macro level, the most common way to look at debt is to relate it to output (i.e. GDP).If you don’t grow and there is no in a on then debt levels won’t decrease unless savings rates increase. An increased savings rate is not helpful for investments, which would then nega vely a ect growth. This is the scenario central bankers, poli cians and anyone else owning assets want to avoid. We need con- dence and investments. Both are a bit thin on the ground at the moment. This economic cycle is very di erent from anything anyone has seen before, but we believe it has a few years le to run.

Madrague had a tough month in August, -2.37%. This brings the year to date performance to +5.97%.

Our best sectors were the Oil, Chemicals and U lity sectors. These sectors all showed a small pos- i ve absolute performance. Worst performers were the Telecom, Technology and Retail sectors.

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