|2 Apr 2014|
QLAB UPDATE MARCH 2014
- Sailors might describe the markets in March as “choppy” with (perhaps refreshingly) mixed performance amongst equity sectors, currencies and especially high dispersion amongst commodities which allows for diversified multi-asset portfolios to carry on their set course with less worry than single asset or focused portfolios
- The absolute return strategies are positive year-to-date but had a slightly negative month due to exposure to Healthcare and Consumer Discretionary equities which sold off rather quickly plus minor negative performance in 2YR US Treasuries, and most currencies, however the losses were partially offset by exposure to Industrial and Financial equities plus NZD which performed well
- The equity relative return strategies lost a bit of ground against their benchmarks, again mostly due to Healthcare and Consumer Discretionary exposure, however performance year to date holds up well especially in the European and the Global strategies
- The commodity relative return strategy also lost ground versus its benchmark in March due primarily to not being exposed to Wheat which shot up over 13% in March, however it is worth noting that short term volatility in some commodities is very high currently and not necessarily indicative of trends.
The medium to long term trends are still in place in equities, US treasuries and the currencies with improved strength now showing in some commodities. Despite the choppiness recently, short-term risk in equities and commodities still remains at or below long-term averages.
- US Equity allocation slightly reduced now that commodities have come in due to the risk budgeting process, however the relative sector exposure remains the same
- Commodities make a come-back due to general strengthening with allocations to Oil and Coffee
- FX exposure (long against USD) remains the same in CHF, NZD, EUR and GBP
- Fixed Income exposure is similar with continuing low duration in the 2YR Treasury bond
- The dynamic leverage exposure in the Dynamic Allocation strategy remains at the maximum of 300% keeping volatility similar to that of global equities.
- Global Equities: Consumer Discretionary exited with a new position in Financials with remaining exposure to Industrials, Healthcare, Technology and Utilities
- US Equities: Consumer Discretionary and Industrials exited with new positions in Utilities and Financials with remaining exposure to Material, Healthcare and Technology
- European Equities: Healthcare exited with a new position in Technology and remaining exposure to Industrials, Utilities, Telecoms and Financials
- Commodities: Zinc and Oil exited with new positions in Wheat and Corn with remaining exposure to Soya Beans, Cotton, Coffee, Cocoa and Natural Gas.