Tuesday February 17th, 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 negative in January driven by currencies and commodities, while equities finished positive.
In equities, all sectors were positive contributors with the best performers coming from technology, healthcare and consumer discretionary. Equity holdings in the Fund are USD based and not CAD hedged which provided a tailwind this month.
In currencies, the best performer was South African Rand which rallied on the back of unhedged portfolio bond flows looking for higher yields. We subsequently rebalanced out of the rand, and into Indonesian rupiah which saw gains over the rest of the month. The worst performer was short Swiss franc which finished up 7% on the month. The Swiss National bank shocked markets by removing its peg versus euro which caused a volatile revaluation higher in the franc. During the month, the Fund pared back Swiss short positions and added Swedish Krona short positions.
In commodities, short Brent oil was the best performer as supply overhang continued to weigh on prices. The worst performer was long copper which fell 13% to 5 year lows on declining demand and worse than expected economic data in China.
This month the Fund rebalanced its commodity positioning by replacing shorts in cotton with shorts in WTI oil.
Markets were volatile this month as central bank activity dominated most of the headlines. Deflation worries spurred the ECB to initiate a Euro 1.1 trillion stimulus package targeting the purchase of sovereign debt. The Bank of Canada shocked the market with a 25 bp rate cut citing recent weak economic data and concern over the negative effect of plummeting oil prices. The Swiss national bank roiled financial markets when it removed its long held peg versus the euro triggering a historic 20% move higher in the Swiss franc. This month European equity markets were the strongest performers on the back of the ECB action. U.S. markets ended down 3% and the S&P/TSX closed slightly positive. Commodities continued to experience weakness this month. The energy sell off extended lower as crude fell another 10%. Copper fell 13% to 5 year lows on declining demand and worse than expected economic data in China. Precious metals bucked the trend as gold rallied on safe haven flows. Currency markets were extremely volatile this month as central banks drove large moves. The dollar continued to see strength versus the Euro and other commodity currencies. Canada was the worst performing G10 currency falling 8.7% after the BOC’s surprise rate cut.