June 2013 -1.23%
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
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.
- 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.