NUR January 2022 Edition

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Contents Page

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Quick Take on Iberian Markets

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eVTOL: Ride to the Future

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9 Page

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DeFi (Decentralized Finance)

NIC-UD Fund: Monthly Performance

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Quick Take on Iberian Markets Rui Coelho Spanish economic growth forecast lowered after Q4. The surge in Covid-19 cases, supply chain bottlenecks, and rising inflation have caused the Bank of Spain and the IMF to revise their growth expectations for the Spanish economy. The IMF now expects an economic expansion of 4.6% in 2021 and 5.8% in 2022, down from a 6.4% estimate for 2022. Spain is only expected to return to its pre-pandemic economic activity in late 2022 or early 2023. Portugal considering waiving quarantine restrictions on election day. Amid the soaring Covid-19 cases, Portuguese authorities have been pondering changing isolation rules so more people can vote. The National Elections Commission has stated that the pandemic cannot restrain the right to vote as it would be unconstitutional. The Socialist Party (PS) is ahead in the polls with 38% of voting intentions followed by the Social Democrats (PSD) with 31%, five percentual points more than in November. Spain to extend energy tax cuts to May 2022. Gas supply constraints and strong demand have led to record-high energy prices across Europe with Spanish household electricity prices rising 35% over the past year. The tax cuts that were due to expire at the end of 2021 have been extended to relieve consumers. Energy is far from the only cost increase Spanish consumers are suffering as inflation reached a 30-year high in December. Inflation has largely been played down by central banks as they deem it transitory. Portugal injects €536M in TAP airline through a capital increase. With the new capital injection, the Portuguese state is now the company’s sole direct shareholder. In December, the European Commission approved a €2.55B restructuring plan that is hoped to ensure the airline’s long-term viability. To comply with the plan, TAP will have to split its two airlines into separate businesses, divest non-core assets, and implement measures to

increase competition at the Humberto Delgado airport. Moreover, the airline and its holding company is forbidden to make acquisitions and will have to reduce its fleet. Spanish government in agreement for labour reform. After months of negotiations, an agreement with employer associations and the unions was reached to implement the labour reform. The new legislation will tackle temporary contracts and boost job security, translating to higher bargaining power and rights for workers. Spain currently has an unemployment rate of 14%, one of the highest in the European Union, with youth unemployment at 30%. In 2021, the PSI-20 had its best performance since 2017. The PSI-20 index closed the year at 5,569.48, up 13.7% after being in the red in 2020. CTT Correios (+94%) and Novabase (+62%) were the biggest gainers while Pharol (39.8%) and EDP (-6.8%) were the laggards. The IBEX 35 closed the year up 7.9%, still below its pre-pandemic levels. The increase was driven by a strong performance from Rovi (+95.7%), Fluidra (+70%), and the financial sector. Both indexes underperformed international markets and the EuroStoxx 50 (+20.7%). Galp to build lithium plant with battery maker Northvolt. The plant to be located in Portugal will be the largest in Europe when it begins commercial operations in 2026, with the joint venture Aurora, 50/50 owned by the two companies, operating the plant. It will have a production capacity of 35.000 tons of lithium hydroxide of which 50% will be purchased by Northvolt for its battery-making operations. The final investment amount is expected to be around €700M creating up to 1500 new jobs. This investment comes as demand for lithium batteries soars due to the increased production of electric vehicles.

3 NIC Undergrad Review


eVTOL: Ride to the Future When science is no longer fiction, is eVTOL coming to disrupt mobility? New Tech eVTOL (pronounced “ee-vee-tol”) stands for

electric vertical take-off and landing, something

which may seem utterly farfetched. In truth, the technology has been in development for over ten years now, having started out slowly but seeing huge progress over the past two years. With no lack of honesty, we are looking at electric flying vehicles the likes of which may bring close resemblance to 1982’s Blade Runner. However, they must not be seen merely as flying taxis, as the alternatives of transportation are not restricted, going from cargo to a simple 30-minute flight across the country. It is important to note that eVTOLs make part of a broader industry, the advanced air mobility industry (AAM), which in the 9 first months of 2021 alone attracted $5.4B in investment, shown in the graph below, as founders and investors alike grow fond of the possibilities. eVTOLs might not operate in full steam until 2030, but anticipation is fuelling the masses.

Miguel Amaral

restrained. The AAM industry houses diversified socalled futuristic means of transportation, from hypersonic players to drones, but it does not stop here. What is key to take into account is that no attempt of disruption will be feasible if logistics is to be neglected as a priority. In fact, it is very much a concern that should be on each and every developer’s mind, and thankfully it has been rightly so.

In regards to investment in the AAM industry, even though eVTOLs have taken 80% of funding in recent years, unmanned traffic management (UTM) and infrastructure providers take up 10% of the remaining share of the pie. However, it is still well below a sustainable threshold for advanced aviation to work. In reality, many players in eVTOL will rely on third-party participation, which will create a sheer level of dependency the likes of which could harm the sustainable development of the industry, bringing higher power to suppliers. Unfortunately, risks do not stop here.

Troubled Skies

Source:McKinsey & Co

Advanced Air Mobility When one wonders about what should be considered “advanced”, imagination should not be

To take off, flying vehicles first need to have a place to land. eVTOLs have attracted deeper investment in recent years as many seek out to overcome increasing road congestion, developing plans to overcome production and rollout costs. However, their concerns might be somewhat misplaced. Building new infrastructure in cities can be absurdly costly, and unfortunately, free space is lacking. Some companies inside the industry have already been developing alternatives to steer around the problem, but the truth is that many are still hoping for a glimpse of creativity and good faith 4 ggggg

NIC Undergrad Review


from urban developers. With no solution in sight for many of these companies, they will likely suffer the consequences of having neglected such pressing issues. Many eVTOL developers are aiming to provide human transportation. But a question remains: will people feel it is safe? Clearly the psychological factor plays a role in the future success of this technology. Thankfully, a recent study conducted by Frost & Sullivan to over 5000 individuals aged 18 or above concluded that only those aged 56 or over showed signs of negative inclination towards the technology. What’s more, in September 2019 around 20000 people attended an event at the Mercedes-Benz Museum where they were able to witness an eVTOL take flight. In a questionnaire completed afterwards, around 67% of respondents stated they were likely or very likely to use one in the future, a percentage that was considered a “remarkably high result”. However, there must always be the flipside: only 45% of respondents expect air taxis to become part of their daily lives in the future. Even though in Blade Runner we never quite witnessed any crashes, it must have come at an expense of deep and developed air traffic management. In truth, it does not exist as of yet, at least outside the scope of aeroplanes and helicopters. In order to become fully operational, eVTOLs must be aligned with development in the aforementioned areas, something that is already in motion. However, time is lacking, and concrete measures must be developed as soon as possible if developers aim to have a shot at succeeding.

Time Travel No service will be operational if no demand exists for it. In the absence of demand, a service is deemed obsolete and rapidly thrown into the garbage can if it fails to follow the overall recent trends. So what exactly drove this recent spike in eVTOL development? Time. Time is money. We have heard it time and time again. However, with the absurd level of traffic congestion in cities and their corresponding main roads, it becomes harder than ever to reach the desired destination in time. Not unless you discount a significant amount of minutes in advance to prepare for the unnerving stop-start traffic ahead of

you. In a recent survey conducted by McKinsey, the company developed that the main reason why passengers would consider an AAM vehicle was precisely because it would lead them to arrive at their destination quicker. eVTOLs in development now boost an average speed of 246km/h, which, allied with concrete air traffic management, can significantly reduce waiting periods and allow us to remain in bed just those 15 minutes longer.

Source:McKinsey & Co

Not quite my Tempo A key question remains. Can eVTOLs capture a significant share of the market, or will they be reduced to a niche? Honestly, it is hard to tell, and opinions go from both sides of the spectrum almost constantly. Porsche Consulting Group (PCG) recently predicted that the market for eVTOLs will be in the order of around $32B by the year 2035, albeit only made possible if there is significant investment pipelined to the industry. Nevertheless, PCG believes that there is a good opportunity to be made with the technology, as long as social acceptance is assured and a significant route of networks is established. At the opposite end of the discussion, a far more bullish Morgan Stanley believes that the market can be in the order of $1.5T in value by 2040. Sure, it is still a long way off, but expectations are mounting and anticipation is increasing year on year. Personally, I see it beginning as a niche add-on to existing transportation alternatives already available. Naturally, one would be inclined to believe that expensive prices would be the norm in the beginning. Not so much. 5

NIC Undergrad Review


Many companies have already promised fees aimed at rivalling train ticket prices, which, if made operational, would significantly increase the chances of eVTOL succeeding. Whether these promises will be kept, only time will tell. It is key to note that the main reason that helicopters, deemed to disrupt the aviation industry, failed in their task was due to their excessive noise that was considered unsustainable for everyday transportation. eVTOLs will come as a solution to this problem, as one of the main promises laid out by developers is the reduced noise whilst travelling, both for passengers and those outside the vehicle. It is imperative that, with a technology aimed at urban transportation, noise disturbance is kept to a minimum. Otherwise, social acceptance will never be achieved, at least at a sustainable level, and eVTOLs will be doomed to fail. Taking this noise factor into account and knowing that simultaneously travel time, CO2 emissions and ticket prices are to be reduced, I personally expect that eVTOLs will eventually become a cost-effective and time-efficient method of transportation. It is also important to note that in no way is it to rival the airline companies’ business. Rather, it is aiming for short to medium distances, something that is not yet on the scope of the aviation industry, and therefore a market to target.

Special Purpose Acquisition Companies ( SPACs) SPACs, in a simple fashion, are companies specifically designed to acquire or merge with promising private companies, taking those companies public without all the bureaucracy and paperwork that characterize IPOs. It should come as no surprise that companies that are developing eVTOL technology have gone public

through SPACs, almost all around the industry. Lillium, Joby Aviation and Archer, to name a few, have all taken to this route to list in public markets. But what is in it for them? As aforementioned, reducing the pressure of listing publicly through IPOs is significantly reduced through SPACs, which is undoubtedly a huge advantage. However, this is just scratching the surface. Through SPACs, companies are provided with higher valuations after listing, greater speed to capital as SPACs significantly enhance a company’s assets, more certainty and transparency, and also lower fees. SPAC sponsors are often experienced financial and industrial professionals, who may act as financial advisors for issues the company might face in the future. Nevertheless, one must also consider the downsides, as, for most SPACs, founders get to keep 20% of the equity of the company, considerably enhancing dilution for the one that has been acquired. All in all, it is ultimately a risk taken by companies, but its advantages regularly outweigh the downsides.

Source: McKinsey & Co

Recently, SPAC deals have only grown in size and amount in the eVTOL industry, as showcased in the graph above. Investors are keeping bullish positions on the technology, taking concrete steps to fund the development. Newcomers such as Eve and Vertical have benefitted from such deals, and they are likely to increase in the future. Industry rivalry will go up crazily, but fortunately there are some key players to keep in mind.

Honey, where’s my Super Suit? There are three key players in the eVTOL industry I would like to mention: Lillium, Joby Aviation and Blade. 6

NIC Undergrad Review


Lilium(Nasdaq: LILM) is a German aerospace venture-backed company, producer of the electrically powered Lilium Jet. It is aiming to launch the service in Germany and USA in 2024, and Brazil in 2025. Important to mention is that, unlike most companies, it already has a rollout plan for each of the above-mentioned countries. For Germany, it has established partnerships with regional local hubs for the take-off, landing and management of the air traffic; for Brazil, it has partnered with known airline Azul for the rollout, and in the USA it already has a 14 hubs partnership in Florida. It has partnered with Palantir for data management and CustomCells for the development of efficient batteries, among others.

Blade(Nasdaq: BLDE) is an urban air mobility network operator based in New York City. On May 7, 2021, it became the first publicly traded urban air mobility company. Unlike Lilium and Joby, Blade offers services outside eVTOL, but has recently taken steps to enter the industry. Blade does not aim to build aircraft, but rather operate a network, like the Uber of the skies. It has become the category leader in Urban Air Mobility, and it aims to enter into eVTOL through a partnership with Beta Technologies that will supply the company with the vehicles it needs to operate the network. Blade’s Stock Performance

Lilium’s Stock Performance

Source: Bloomberg

What is in it for investors?

Source: Bloomberg

Joby Aviation( NYSE:JOBY) is a Californian venture-backed aerospace company accounting for over 10 years in the development of its technology. Having recently partnered with NASA for a sound test on its aircraft, it received stellar remarks from the experience. In 2024, Joby expects to shorten hour-long car rides into five-minute eVTOL trips for the same price as an Uber covering the same distance. It recently partnered with Uber itself, through a $75M investment, in order to integrate Joby’s services into Uber Elevate, Uber’s prospective ride-sharing aerial transportation app for the future. The move will allow Joby to use Uber’s app to offer air taxi rides when the aircraft enters service, which could be as soon as 2023. Joby’s Stock Performance

Source: Bloomberg

All this myriad of information might leave many wondering whether exactly the technology will succeed in the future. I truly wish I had a crystal ball to predict it, but if we were to make predictions by sensible investment banks into account, the future does look bright. Generally speaking, eVTOLs have three main advantages against helicopters: they are cheaper, quieter and more environmentally friendly. In 2019, Uber Elevate estimated that eVTOLs would have a near-term operating cost of around 700$ per hour, a decrease of 35% compared to helicopters. Batteries are becoming more efficient, as billions in investment are being poured into R&D mainly due to the market for electric vehicles. When combined with ride-sharing apps, the likes of Uber Elevate, eVTOLs can become an affordable form of transportation that allows users to reach destinations quicker and in the absence of social disturbance due to noise. I invite you to search on YouTube for Lilium’s test flight with sound, where it is perfectly showcased how absurdly low their sound is when hovering at a sensible altitude. However, it would not be fair of me to leave out challenges the industry faces. As of writing this 7 ggggg

NIC Undergrad Review


article, no company has yet passed all certifications required for human transportation, and there is still a long way to go. Some are highly advanced, such as Lilium and Joby, but ultimately it is highly dependent on the tide. Operational risks are also a concern, as in order for eVTOLs to work deep air traffic management must be developed. Some players are aiming to control it themselves, whilst others forged partnerships so that it is externally regulated. There is no consensus. Last, but definitely not least, social risks arise. If there is no social acceptance of the vehicles, no demand will exist for the service and all that investment will have gone to waste. As a final remark, investing in eVTOL is undoubtedly a speculative investment at this point. It is still not clear whether public acceptance will be assured, never mind the regulatory concerns that may emerge. However, the advantages the technology brings are hard to neglect. It may start out as a niche in the beginning, but many do see it growing into a cost-efficient and environmentally friendly alternative that deserves its significant share in an ever-developing market.

8 NIC Undergrad Review


DeFi (Decentralized Finance) How ever-growing technology is revolutionizing modern finance What is DeFi? DeFi is short for “decentralized finance”, an umbrella term for a range of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries. Before it was commonly known by the name it presents today, the idea of DeFi was often called "open finance." It is a rising financial technology based on safely distributed ledgers similar to the ones used by cryptocurrencies. It gains inspiration from blockchain, the technology behind the digital currency bitcoin, for example, which allows numerous entities to hold a copy of a record of transactions, meaning it isn’t controlled by a single, central source. The system eliminates the regulation of third parties in financial transactions, such as the one banks, and institutions have on money, financial products, and financial services. That is important because centralized systems and human doorkeepers can limit the speed and sophistication of transactions while proposing to consumers less direct control over their money. Summing up, it is an open and worldwide financial system built for the internet age: a substitute to a system that is opaque, firmly controlled and held together by decades-old infrastructure and procedures. This new technology is very attractive for users as it eliminates the fees that banks and other financial institutions charge for their services; it allows for the possibility to hold money on a safe digital wallet rather than keeping it in a bank or “under the bed”; any person with an internet connection can use the system without any need for approval; it is possible to transfer funds within minutes or even seconds. DeFi is different because it magnifies the use of blockchain from simple value transfer to more complex financial use instances. Bitcoin and many other digital-native assets stand out from heritage digital payment methods, such as those run by Visa and PayPal, in that they take away all go-betweens from transactions. With DeFi, the markets are always open and there are no centralized establishments that can block payments or refuse access to anything. Services that were formerly slow and at risk of human error are automatic and

Diogo Zuzarte

safer now that they're dealt with by code that anyone can inspect and scrutinize. Cutting out middlemen from all kinds of transactions is one of the main pluses of decentralized finance. When someone pays with a credit card for popcorn at a cinema, a financial institution sits between that person and the business, with control over all the trading process, retaining the authority to stop or pause it and record it in its private ledger. With bitcoin, those institutions are cut out of the picture. Direct acquisitions aren’t the only form of transaction or contract overseen by large companies. Financial applications such as loans, insurance, crowdfunding, derivatives, betting, and more are also in their control. Companies have started streaming their employees their wages in real-time and some persons have even taken out and paid off loans worth millions of dollars without the need for any personal identification. There's a booming crypto economy in our days, where you can lend, borrow, long/short, earn interest, and not only that: crypto-savvy Argentinians have even used DeFi to escape crippling inflation. The main components of this emerging financial technology are stable coins, software, and the hardware that allows the development of applications. Regarding the infrastructure for DeFi, it is still under development and debate as well as its regulation.

DeFi Applications Most decentralized finance applications are developed on top of Ethereum, the world’s secondlargest cryptocurrency platform, which sets itself apart from the Bitcoin platform by being easier to use to build other types of decentralized applications (dapps), beyond simple transactions. These additionally complicated financial use cases were even emphasized by Ethereum’s creator Vitalik Buterin in 2013 in the original Ethereum white paper. That’s because Ethereum’s platform for smart contracts, which mechanically execute transactions if specific circumstances are met, offers much more flexibility. Ethereum programming languages, such as Solidity, are purposely crafted ggggg

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for creating and arranging such smart contracts. For example, let’s imagine a certain user wants his money to be sent to a friend on a specific date but only if, on that day, there is a football match with 10 goals in total from both teams playing in some part of the world. This type of rule can be written in a smart contract. With smart contracts at the core, there is a wide range of DeFi applications operating on Ethereum, some of which are explored below. There's a decentralized substitute to most financial services, but Ethereum also designs chances for generating entirely new financial products, which is an ever-evolving list: Send or stream money around the globe; borrow funds with collateral and without collateral; access stable currencies; start crypto savings and trade tokens; buy insurance; manage and grow a portfolio; fund ideas. The most popular types of DeFi applications include: Decentralized exchanges (DEXs): This type of application allows people to trade crypto assets without needing a trusted central regulator. This permits to cut down on the risk of exchange hacks, for example. There are many types of decentralized exchanges, which can be auction-based; off-chain order book; peer-to-peer; pool-based; or aggregators. Stablecoins: This application was designed with the intent to approximate cryptocurrencies to the countries’ currencies circulating today. A useful currency should be a medium of exchange, a unit of account, and a store of value. While cryptocurrencies excel as a medium of exchange, they fail to their customers as both a unit of account and a store of value. Something can't be an effective store of value if its price fluctuates by 20% on a normal day. Here is where stablecoins come in, being cryptocurrencies designed to minimize the effects of price volatility, and so they seek to work as a store of value and a unit of account. To minimize unpredictability, the value of a stablecoin can be attached to a currency, or to exchange-traded commodities, mainly the ones that already offer some degree of stability. These types of coins that are backed by currencies or commodities directly are said to be centralized, for example, Gemini Dollar and USD coin, whereas those leveraging other cryptocurrencies are referred to as

decentralized, for example, MakerDAO – DAI and Bitshares - BitUSD. Lending platforms: This type of application consists of using smart contracts to substitute middlemen, such as banks. This is a very popular form of DeFi, as it allows to connect lenders and borrowers of cryptocurrencies. There are several platforms such as bZx that defines a protocol for decentralized margin trading. It employs a hybrid order model, where third-party players each maintain their order book while orders are settled on-chain; Compound gives people the capability to borrow and lend tokens. In this platform, users contribute to a shared pool of tokens, from which lenders can receive a debt. Lenders can repay the debt at any time, by maintaining a sufficient warranty. In case this doesn’t happen, the debt is defaulted by selling the lender’s assets in an auction. Other platforms that can be found operating are Dharma, dydx, Fulcrum, Maker, and Torque. "Wrapped" bitcoins (WBTC): This application is a way of transferring bitcoin to the Ethereum network so that the cryptocurrency can be used directly in Ethereum's DeFi system. WBTCs let users earn interest on the bitcoin they lend out via the decentralized any of the lending platforms described above. Prediction markets: This type of application facilitates the trading of event derivatives. They are markets for betting on outcomes, such as the results of football games. This type of markets exist since the 1990s and are sometimes also referred to as information markets, idea futures, or decision markets. This is one of the oldest “dapps” existing on Ethereum and the objective of the DeFi version is to offer the same functionality that existed before, but as with lending, to take the intermediaries out of the picture. By decentralizing prediction markets, it is believed that is possible to harness their full potential by lowering the cost of participating, bypassing strict regulation, and increasing adoption by making the platforms more accessible across geographies. In addition to these apps, new DeFi concepts have sprung up around them: Yield farming: For knowledgeable traders who are willing to take on risk, there's yield farming, where ggggg 10

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users scan through various DeFi tokens in search of opportunities for larger returns. Liquidity mining: Process where users lock up assets into a protocol and over time are rewarded with governance tokens. Users can now lock up liquidity into Compounds and based on the amount that they have either supplied or borrowed are given a certain amount of Comp tokens. The main idea behind this is that it rewards people that are using the protocol. This has been the buzziest form of yield farming yet. Composability: DeFi apps are open source, meaning the code behind them is public for anyone to view. As such, these apps can be used to "compose" new apps with the code as building blocks; Money Legos: Putting the concept "composability" another way, DeFi apps are like Legos, the toy blocks children click together to construct buildings, vehicles, and so on. DeFi apps can be similarly snapped together like "money Legos" to build new financial products.

The future of DeFi To truly perceive the full potential of decentralized finance, one of the best ways to do so is to understand the nowadays’ problems regarding centralized finance: There is a deficiency on access to financial services, which can preclude people from being employable; secondly, some people are not granted access to create a bank account or use a range of financial services; there are financial services that can block people from getting paid; governments and centralized institutions, in their regulation perspective, can close down the markets at will, being trading hours often restricted to business hours of a particular time zone; money transfers can take days to be processed due to internal human procedures; a hidden burden of financial services is the person’s data; and, finally, there is a premium to financial services because intermediary institutions need their cut. In an attempt to answer these problems that many people may feel they face today, DeFi was born as the solution. Making a comparison between decentralized finance and centralized finance, we can see that in DeFi people hold their money and control where the money goes and how it is spent, while in centralized finance it is held by companies

and one must trust those companies not to mismanage their money, like lending it to risky borrowers. Whilst in DeFi transfers of funds happen in minutes and the transaction activity is pseudonymous, in centralized finance payments can take days due to manual processes, and the financial activity is tightly coupled with one’s identity. DeFi is open to anyone and with it, the markets are always open, whereas in centralized finance there is a need to apply to use financial services and markets close because there is a need for breaks as they are controlled by humans. Finally, DeFi is built on transparency, being possible for anyone to look at a product’s data and inspect how the system works, while financial institutions are closed books, not being possible to ask to see their loan history, a record of their managed assets, and so on. Ethereum 2.0, a coming upgrade to Ethereum’s underlying network, could give the dapps a boost by chipping away at Ethereum’s scalability issues.

Conclusion Decentralized finance is still in the starting stages of its development. For starters, it is not regulated, meaning that the ecosystem is still withered with infrastructural mishaps, hacks, and scams. DeFi’s borderless transaction ability presents essential questions for this type of regulation. For example, who is accountable for investigating a financial crime that occurs across borders, protocols, and DeFi apps, known as “Dapps”? Who would impose the regulations, and how would they compel people to abide by them? Current laws were shaped based on the idea of unconnected financial jurisdictions, each with its own set of laws and rules. The decentralized finance ecosystem’s open and distributed nature may also create problems to the prevailing financial regulation. Other worries are system stability, energy requirements, carbon footprint, system upgrades, system maintenance, and hardware failures. Many questions must be answered, and advancements made before DeFi becomes safe to use. Financial institutions are not going to let go of one of their primary means of making money. If DeFi succeeds, it's more than likely that banks and corporations will find ways to get into the system; if not to control how you access your money, then at least to make money from the system.

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NIC-UD Fund: Monthly Performance Approaching 2022, equity markets bounced back as Omicron shows to be a much “ lighter variant” Global Markets The month of December was marked by the rapid propagation of the Covid-19 Omicron variant. At the beginning of the month, the downtrend from November continued due to the uncertainty around the more contagious South African strain. However, once data stated to arrive reporting a significantly lesser risk of severe illness, global markets rebounded. Rapidly increasing cases all around the globe were not enough to shatter investors optimism. Instead, the proof of vaccine effectiveness in preventing serious and a smaller correlation between confirmed cases and deaths due to Covid-19 eased the November fears of harsh lockdowns. Inflation was once again one of the main catalysts of market performance during the month, having the U.S CPI reached a 6.8% YoY growth rate, an increase not witnessed since 1973.

António Gouvêa

Central Banks across the world are showing increasing concerns about these rates, worried about the persistence of the current growth of consumer prices. The Federal Reserve announced that it would increase the pace of taper to end its Asset Purchase Program by the end of March 2022, also predicting three following rate hikes in the same year. The U.S government bond market sold off in anticipation for this reversion, particularly in the lower end of the yield curve, with the U.S 2 Year Treasury hiking to 0.7067%. In Europe, despite inflation hitting a new recordhigh of 5%, the ECB announced that tapers are expected to run until 2023, only then ending quantitative easing. In the equity market, due to the anticipation of raised interest rates, growth stocks were hurt the most as investors sought refuge in value as uncertainties of future growth arise amidst concretionary monetary policy.

Current Positions Regarding capital allocation, no new positions have been open in our portfolio during December. The Pharmaceutical Industry was in highlight during the month, as the Omicron variant and the holiday season made the demand for Covid-19 tests soar. The top performer out of the portfolio was Walls Green Boot Alliance (WBA), with a 19.30% share price increase. In addition, Invesco Biotech ETF (SBIO) was amongst the top tickers at the end of the year, with an 8.96% monthly increase. Regarding other industries, Kirkland Lake Gold (KL) was also a top performer in our portfolio, with an increase of 10.05%. Positions Weight on Total Equity

3,99% 5,84%

15,93%

3,81% 2,85% 3,46% 6,38%

3,07%

4,87%

7,69%

4,34% 5,90% 3,43%

12,74%

5,80% 3,16%

6,71%

Aerospace & Defense UK Holding Company US Accounting Software Tobacco UK Chinese Govt Bonds Consumer Products EU Oil & Gas US Internet US Food & Beverages ETF Gold Miner Electric Batteries ETF Renewables US Entertainment US Gaming ETF Pharma Retailer Biotechnology ETF Cash

Industry

Type

1

Aerospace & Defense UK

UK Equity

Current Price Open Price £5.55

£4.93

2

Holding Company US

US Equity

$308.53

€287.90

3

Accounting Software

US Equity

$100.57

$103.60

4

Tobacco UK

UK Equity

£27.74

£27.98

5

Chinese Govt Bonds

Bond ETF

$5.62

$5.34

6

Consumer Products EU

EU Equity

€56.60

€47.80

7

Oil & Gas US

US Equity

$22.95

$22.97

8

Internet US

US Equity

$336.53

$175.75

9

Food & Beverages ETF

ETF

$88.64

€86.27

10

Gold Miner

US Equity

$41.76

$44.74

11

Electric Batteries ETF

ETF

€16.87

€9.91

12

Renewables US

US Equity

$90.68

$75.49

13

Entertainment US

US Equity

$155.73

$141.70

14

Gaming ETF

ETF

$40.60

$25.21

15

Pharma Retailer

US Equity

$53.48

$47.14

16

Biotechnology ETF

ETF

$45.73

€51.30

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NIC-UD Share Price (Inception Cumulative Returns) 8% 7% 6% 5% 4% 3% 2% 1% 0% 1/12/21

6/12/21

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Benchmark Analysis Monthly Performance 20% 15% 10% 5% 0% -5%

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# oc 1 k # ET 1 F St # 2 oc k St #2 oc k # ET 3 F St # 3 oc k St #4 oc k St #5 oc k St #6 oc k # ET 7 F # St oc 4 k St #8 oc St k # oc 9 k St #10 oc k # E T 11 F # 5

-10% St

The month of December was net-favourable for equities, as data from the Omicron variant implying significant less risk of severe illness boosted investors’ confidence. The S&P 500 was the index that was more favoured due to the improved Pandemic outlook, with a 5.61% MoM return. The MSCI World Index also benefited from the optimism, increasing 4.66%. European equity markets followed the trend. The Eurostoxx 50 index rose 2.85% in December. In Portugal, the PSI-20 rose 1.75% despite record-breaking cases of Covid-19 near the end of the year. As stated previously, concerns over the hiking of interest rates due to inflation have hurt high growth industries like Tech. Consequently, the Fang+ Index was by far the worst performant out of the group being the only benchmark that decreased (0.51%) during the month. Finally, our fund ended the year on a favourable note. The share price increased 3.79%, erasing the losses of the previous month and outperforming most of our benchmarks. However, the fund still lagged behind the S&P 500 and MSCI World Indexes.

Portfolio return vs Benchmarks 5,61%

6%

4,66%

5% 4%

3,79% 3,01%

3%

2,85%

3,06% 1,76%

2%

1,75%

1% 0% -1%

-0,51% Portf oli o S& P 500 (Share Price)

MS CI World Index

FTSE 100 Eurostoxx 50

Nikkei

Shanghai FANG+ Com posite

PS I 20

Corporate News At the begging of the month, news broke out that WalgreensBootsAliance may be considering the sale of its U.K chain, Boots. Although the firm did not confirm a specific sale of the branch, it did announce a renewal of the firms' priorities for the upcoming years, with a “ more pointed focus on North America and Health Care”. Internet Association, a once-dominant tech lobby is closing its doors due to an apparent divide between big tech companies. Companies like Microsoft and Uber pulled their financial support out of the lobby group which once named itself the “unified voice of the internet economy”. The dissolve shed a light on the division of Big tech in what regards to antitrust issues, in a time where the Biden´s administration has promised to toughen anti-monopoly regulation in the sector. To conclude, after a feud over carriage fees which ended in a total blackout of Disney content on Google’s YoutubeTv, the two companies have signed a new deal for Disney content to be displayed on the platform. 13 NIC Undergrad Review



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