Tuesday March 10th, 2015
The Fund seeks to provide absolute returns that are not correlated to broader equity or bond markets. The Fund employs a multi-strategy approach by allocating its assets across various asset classes including equities, currencies and commodities.
The Fund was positive in February with all 3 asset classes posting gains.
In equities, all sectors were profitable. The best performers were energy and materials, as a rebound in oil and copper prices helped lift cyclical commodity holdings.
In currencies, the best performer was short Swiss franc which sold off after its huge move higher the previous month. Negative Swiss deposit rates and continued dollar strength drove weakness across the currency. The worst performer was long Indonesian rupiah which sold off after the central bank conducted a surprise interest rate cut emboldened by lower inflation forecasts due to lower oil prices.
In commodities, long heating oil was the best performer as cold weather demand and a decrease in U.S. oil rig count helped lift the energy complex. Short Brent oil was the worst performer, as prices squeezed higher supported by rising concerns over Iraqi and Libyan supply disruption.
This month the Fund rebalanced its commodity positioning by replacing shorts in gasoil with shorts in lean hogs.
Markets rebounded higher in February with dip buyers emerging on waning geopolitical concerns and optimism on the global growth outlook. Concerns over Greece’s ability to meet its fiscal pledges receded as bailout provisions were extended by the ECB. Generally positive U.S. earnings, strong jobs data and supportive Fed comments helped the S&P close up 5.7% on the month. European equities outperformed other developed markets as inflows increased on the back of the ECB’s supportive actions from the previous month. U.S. 10 year yields squeezed quickly back above 2% as safe haven demand declined, and the market began to price in a higher probability of a June rate hike.
In commodities, oil managed to recover off the lows with prices buoyed by news of cuts in production and the potential for supply disruption in the Middle East. Gold gave back its January gains retreating lower as safe haven demand declined.
The U.S. dollar continued to exhibit selective signs of strength notably against Japanese yen, Swiss Franc and emerging market currencies. CAD was able to recover higher buoyed by signs of oil recovery and better than expected trade deficit numbers. However, the BOC’s recent dovish comments continued to provide an overhang on the loonie with further rate cuts expected in the coming months.