|2 Feb 2015|
QLAB Invest - Update January 2015
Multi-Asset Absolute Return Strategy Performance as of 31-Jan-2015
RETURNS: Annualised if >1Y
RISK: Annualised standard deviation or volatility, daily data
MDD: Maximum drawdown, peak to trough
Strategy indices live since 1-Jan-2011, net of trading fess, gross of product fess. Investable products may have lower returns and shorter track records
Quite an eventful start to the year with the S&P500 trading in a +/-3% range ending the month down 3%. US treasuries soared, most commodities were considerably down but gold was up. The USD continued to strengthen against most currencies and of course there was the Swiss National Bank’s decision to remove the Euro peg.
Firstly on the SNB, there was no impact on products tracking QLAB strategies due to the CHF move as the various share classes employ full currency hedging. The strategies only hold US equities so no equity impact either. Our Switzerland-based investors thus benefitted from good diversification against Swiss products that have a home equity bias or do not hedge foreign assets into CHF.
Performance YTD of the two absolute return strategies has been good thanks to selective exposure to Healthcare and Utilities equity sectors plus the 5YR US treasury. Some negative contribution came from Consumer Discretionary and Financial equities but not enough to warrant an exit of those sectors. The sector Consumer Staples will come in for February increasing the equity exposure slightly. Despite the CHF surge against most currencies, over a longer horizon of about a year the CHF is down against USD so it will not be bought. Risk is not generally elevated despite recent choppiness and the dynamic leverage in QLAB Dynamic Allocation remains at the maximum of 300%.
All-time highs were reached on 26th January ending the drawdown that started in September. This was due to exiting Energy equities, Commodities and FX positions. What would have happened had these high-conviction actions not occurred? We compare the drawdown of the QLAB Asset Allocation strategy against the naïve market portfolio which is defined as the same investment universe held approximately equally weighted, rebalanced monthly. The chart below shows the difference in drawdowns over the last 12 months. Both portfolios were rather similar until September when the reversal occurred. The QLAB models reacted, selling the falling assets with the result that the drawdown was curtailed.
A nice reminder that the QLAB models are designed to focus on managing risk rather than returns and that they are reactive, not predictive.
QLAB has been nominated for the AIF Factor award hosted by ABN Amro Clearing and QLAB CEO Steven Bates will present the QLAB Convexity DL Fund at the conference on February 11th . If any of you will attend we look forward to seeing you there with our fund management partner RPM Risk & Portfolio Management.
Steven will also join Neue Helvetische Bank, our Swiss certificate management partner, at the Swiss Derivative Awards on 26th March where the QLAB Dynamic Allocation certificate has been nominated for an award. We hope to see some of you there also.
QLAB Asset Allocation and QLAB Dynamic Allocation are accessible in two formats via our product partners:
Please contact us at email@example.com if you would like to receive product information directly from our partners.
- RPM Risk and Portfolio Management (www.rpm.se) manage two Luxembourg funds: QLAB Convexity Fund and QLAB Convexity DL Fund available to professional investors
- Neue Helvetische Bank (www.nhbpro.ch) manage two listed certificates traded on the SIX stock exchange available to Swiss domiciled retail and professional investors