Posts tagged 'Monthly Commentary'

The Global Fund (USD) produced a return of +1.63% for the month, bringing the total return year to date to +2.06% and the 12 month rolling return to +8.02%.

In a month of strong returns, five of the nine themes in the portfolio contributed the bulk of the result. At the manager level, over 75% of our 34 funds made money. There were no loss-making themes.

US Treasury bonds fell during the month as yields rose from 3.61% to 3.84% in 10yr maturities. But this did not stop High Yield bond funds receiving inflows of $1.8bn in March, reversing an outflow of more than $1bn in February. Investment Grade spreads tightened, so did High Yield spreads, but indices of defaulted securities rose much more, racking up a 13th straight positive month in the case of the NYU Stern indicies. This positive momentum was visible in Europe and Asia as well. Credit Spreads in Transition was the top performing theme in the portfolio.

While Greece hogs the headlines, there are significant shifts in Government policy taking place elsewhere. During March, Australian rates rose another 25bps, making a rise of 100bps since October. Malaysia became the first emerging Asian jurisdiction in which rates rose; India followed soon after. The posture of Central Banks in Canada, Sweden and Switzerland also changed. We do not expect the major developed economies to raise rates now nor in the near future. Neither do we regard the Greek liquidity fix as a cure for the solvency problems faced by Southern European borrowers. However, the pattern of widely differing economic performance across countries and between regions is now clearly visible. Our Relative Sovereign Opportunities managers are running increasingly diversified range of attractive and profitable positions as a result. Four out of five of them made money in March.

Our Energy Market Opportunities theme was the third largest contributor to March returns. Crude oil broke out of the $70-80 range in which it had been stuck. This move was accompanied by a fall in volatility and, less surprisingly, by a decline in inventories both in the crude market and in certain refined products. It was also significant that oil rose against a background of dollar strength. The optionality built into the fund of our oil trading manager benefitted from these developments. The equity specialists in the theme had a mixed month. Japan Corporate Event Opportunities and Inflation/Deflation Uncertainty both generated profits.

Global Financial Sector Dislocation had a neutral impact on the month’s results. However, it became clear during March that we should reduce the population of managers in the theme from three to two. The impact of fundamental credit issues on the valuation of Bank stocks has systematically weakened through recent months. It is a perfectly logical expedient for the FDIC to broker deals for the absorption of failing Banks into less vulnerable neighbours. However, the timing of these moves and their impact on the valuation of the securities of the institutions involved makes for a treacherous investment environment. We have submitted redemption notice for the fund in the portfolio that remains exposed to small and midsized US Banks.