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2 Jul 2013

Performance figures
June 2013                  -1.23%
YTD                               1.76%
1YR                               3.46%
2012                             3.00%
2011                             4.18%                  
Since inception           3.59%  (since 1-Jan-11, annualised)     
Cash                             0.19%  (                     “                                )
CPI                                2.1%    (Jan-11 to May-13, annualised)
Risk Figures since inception 1-Jan-11, daily data
Volatility                        4.83% 
Max drawdown           -5.08%
In June the sell-off in bonds continued which has caused the strategy to reduce duration by exiting the 5YR US Treasury position. It’s not often that the 5YR Treasury underperforms cash like this, the last time was briefly in mid 2009 when the drawdown of the 5YR US Government bond was similar to now, -2.5%, and during the more sustained Fed rate-hike period in 2003 and 2004 when the drawdown was larger at about -3.4%. On both those occasions it turned out to be prudent to shorten duration whist rates increased.
Although commodities re-appeared in last month’s allocation it was short-lived and the exposure has been reduced to zero again following a broad sell-off. When commodities are not present in Spectrum the risk budget available for equities increases hence the considerable increase in equity exposure, albeit to the same sectors.
What’s my point? Well, I have sat on enough investment committees to know these kinds of decisions, if taken through discussion and trying to reach consensus and conviction are difficult. In contrast, Spectrum is driven by a systematic process which applies statistical and risk management techniques consistently month after month, without discussion. Consistency and clear decisions can often go a long way in an uncertain world.
The asset allocation for the coming month is as follows, see www.qlabi.com/spectrum-idx.asp
  • Equity allocation increased from 16% to 27% with sector allocation remaining the same in Industrials, Cyclicals, Healthcare and Financials
  • Commodity allocation drops to zero
  • FX exposure decreases from 10% to 6% with positions remaining in EUR and NZD
  • Fixed Income exposure collapses to 66% in 2YR US Treasuries  plus 1% in cash.

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DISCLAIMER: This document does not constitute an offer, a solicitation, an advice or a recommendation to purchase or sell any investment products associated with the material described herein. The purpose of this document is to describe the principles, research and ideas behind the QLAB Invest strategy indices. Prior to an investment in any product tracking a strategy index, you should make your own appraisal of the investment risks as well as from a legal, tax and accounting perspective, without relying exclusively on the information provided by QLAB Invest. Investment products tracking the indices must be issued or/and marketed by a regulated company. This document is strictly for informative purpose. The single source of the underlying asset data is Thomson Reuters Datastream and QLAB Invest cannot guarantee the correctness of the underlying asset data and cannot be held legally responsible in this regard. Any references made to historical performance up to the official live inception do not reflect actual live performance and can be subject to selection, curve fitting and other statistical biases. Performance in investment products linked to the indices may be reduced by the effect of commissions, fees or other charges in excess of those already factored into the index calculations. The level of the indices will fluctuate due to the volatility of the underlying exposures and past performance or volatility is not necessarily indicative of future results.