|3 Feb 2014|
QLAB UPDATE JANUARY 2014
- Perhaps a classic fear response, equity volatility picked up in January with a corresponding sell-off in US, European and Global equity indices of about -3.5% accompanied by strengthening of USD and US Government bonds
- The absolute return strategies consequently had a negative month but were helped somewhat by positive returns in healthcare stocks and the 2YR US Treasury exposure
- The equity relative return strategies outperformed their benchmarks thanks to favourable sector positioning, again mostly due to healthcare stocks
- The commodity relative return strategy slightly underperformed its benchmark due in part to exposure to copper which had a particularly negative month, causing the position to be exited at month-end.
On another note, the performance of QLAB Dynamic Allocation attracted some attention in 2013 with the question attached of “Don’t these high returns come with high risk?”. The simple answer is that the risk is lower and more stable than that of equities in general and shows low correlation properties to equities thus providing good diversification to equity-only strategies. For more details and charts, please see the attached 2-pager.
Equity risk increased in January but is still not excessive compared to the long term average and the major trends are intact hence the allocations remain similar.
- US Equity allocation reduced slightly with the exit of Consumer Staples exposure. Positions remain in Industrials, Consumer Discretionary, Healthcare and Financials
- Commodity allocation remains at zero due to continuing poor overall trend
- FX exposure (long against USD) unchanged with positions in CHF, NZD, EUR and GBP
- Fixed Income exposure unchanged with relatively short duration stance in the 2YR Treasury bond
- The dynamic leverage exposure in the Dynamic Allocation strategy remains at 300% keeping volatility similar to that of global equities.
- Global Equities: Financials exited with a new position in Utilities and remaining positions in Industrials, Healthcare, Consumer Discretionary and Technology
- US Equities: Exposure remains the same to Industrials, Healthcare, Consumer Discretionary, Technology and Financials
- European Equities: Exposure remains the same to Industrials, Healthcare, Consumer Discretionary, Telecoms and Financials
- Commodities: Copper exited with a new position in Coffee and remaining positions in Soya Beans, Cotton, Cocoa, Oil, Nat. Gas and Zinc.