Most of our managers reported a positive performance for November. Our Global Macro Value and Trading manager delivered high above-average returns. Both of our Multi-Asset Managers also contributed nicely to the November numbers and so did our Long/Short Equity & Arbitrage manager. Our Global Fixed Income & FX managers contributed slightly negative. At the beginning of November, we included a liquid and fully systematic, quantitative trend following strategy which reported positive numbers for November.
Monthly Commentary (as per November 30, 2020)
Systematic Trading: With the S&P 500 gaining almost +11%, the strategy closed the month with +4.15%. The alpha overlay contributed with +0.48%, trading mainly seasonality patterns on long S&P 500 future exposures. The balanced component of the portfolio added an additional +3.67%. What was touted in many 2020 outlooks as the big event of the year, the US election passed without upsetting the markets too much as they awaited the news that Joe Biden is to be the next president. Meanwhile, an end to the Covid-19 crisis is now in sight with the first three vaccines are ready to be deployed. The path to recovery, however, may still be bumpy over the coming quarters as governments grapple to control the virus during the winter months.
Global Macro Value: In what was the fund’s 10-year anniversary, November saw the fund 3rd best month in total 120 month. The manager was positioned for positive vaccine and OK election news played out as hoped, though perhaps “dreamed of” is a more accurate description given the 90+% efficacy numbers of Pfizer and Moderna. The returns largely came in equity where the manager had and have most of its risk now, but the fund made additional positive returns in each asset class (credit, commodities and small gains in FX and rates). By book, the returns were split evenly between the investment book and the trading book while hedges did cost. A little over half the gains came from European financials’ performance, where the manager’s large position (in a combination of cash equity, dividend swaps and call options) played out very well.
Multi-Assets: One of our managers in this space sees November likely to be marked as a turning point. This is reflected in this month’s upturn, which the manager believes to be the start of a significant upward trend. The announcement of three vaccines expunged a risk-on mood in markets and added fuel to the post-US election rally, eclipsing nerves surrounding the near-term economic outlook. Markets will digest near-term economic developments with a bath of optimism on the horizon. Our second manager is well prepared for continued performance during an economic downturn – in this case, a global pandemic. The layering approach that the investment committee have taken for the fund mixes investment in cyclical, defensive and efficiency-based assets. This multiple approach served the fun well in November and during 2020.
Long/Short Equity & Arbitrage: The manager maintains its market neutral investment approach within the core strategies and does not invest in longer term macro or directional positions. The manager continues to apply a strong focus on risk management within all strategies given the heightened equity volatility during the past 8 months. The manager believes to be well placed to outperform in current market conditions.
Global Fixed Income & FX: The 2020 US election didn’t disappoint in the drama department. Option implied volatility rose significantly into November 3rd and the world held its collective breath to see who would be the leader of the free world. Election Day was volatile but it was more unusual in the number of large reversals that occurred during the night. Even in prior surprises, the manager hasn’t seen the odds shift within hours from almost certain one way to almost certain the other, and back again – this time the markets experienced two enormous whipsaw moves, and one of them was a huge trend breakout. While there were some good opportunities and comebacks–notably during the second week when the manager profited from short US Fixed income and short Japanese Yen–unfortunately, the second downside breakout of the month also turned out to be a fake one, and the month ended with losses in fixed income and currencies.
For the latest factsheet go to Investment Performance, RML Global Alternative Smart Alpha AMC.