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17 November 2016

Monthly Update: October 2016

Dear Investors,

After the surprising outcomes of the Brexit referendum and the US presidential election, it remains unclear what the effects on the economy and the markets will be. Investors did not seem to focus on a stream of mixed third quarter earnings reports, but are rather paying close attention to the uptick in inflationary signals, and the threat of potential trade barriers. The fear of a hard Brexit, exacerbated by a flash crash of the British pound, contributed to the risk-off sentiment in October. 

Our global long only fund Aphilion Q² - Equities shed 1.9% in October. Since the start of the year, Equities is lagging the market by 2.6% (-2% vs. +.6% for the MSCI World in euro). The majority of this year’s dissatisfactory returns can be attributed to our lackluster performance in October. Could this be because recently, geopolitical developments have been steering the markets, rather than the financial climate or economic data? Our quantitative models are driven primarily by fundamental data, e.g. (revisions to) analysts’ earnings estimates, so perhaps we should just be patient and sit out this period of political instability...
The long term track record of Equities remains solid: the average net return is +7.2%, vs. +2% for global equity (price index).

The hedged version of Equities, Aphilion Q² - Balance, performed poorly in October. The outperformance of the Q² selection forms the backbone of the results that can be expected from Balance. The chart on the right shows a long term perspective: Balance is "live" since September 2014, but Equities already has a proven track record since 2001; and based on these figures, we can simulate the returns of Balance. The average annual outperformance of the Q² selection since the launch in 2001 is 5.2%, and that is the alpha that Balance strives to capture and transform into steady absolute returns. At the moment, Balance is performing below expectation, but we see no reason to doubt our long term targets.

More information can be found in the fund factsheets (available by clicking on the charts above), on our website for the Q² funds and on www.aphilion.com/SIF for our hedge fund for well informed investors only.
Thanks for your continued trust and confidence in the team, and don't hesitate to contact us with questions about our funds,


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