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13 December 2016

Monthly Update: November 2016

Dear Investors,

November was a remarkable month for equity markets around the world, catalyzed by the US Presidential election and an overhang around Europe's path forward with the ongoing saga of European banks. In the aftermath of the US election, financial markets responded positively to expectations for policies like tax reform, reduced regulation, and increased fiscal spending, that could lead to more growth and higher inflation. Markets in the US posted new record highs, and the US Dollar index as well rallied to a cyclical high. Developed-market equities have been in vogue since the US election, with a rotation out of defensive stocks in favor of the Financials, Industrials, and Energy sectors. 

Our global long only fundAphilion Q² - Equities gained 4.8% in November, bringing the NAV back at 300€ per share. The US economy is doing well, while the Euro area is lagging behind. This regional divergence is even more pronounced in the equity markets: while the S&P 500 recorded a return of over 10% (in euro) in the first 11 months of the year, the European Stoxx is still at a loss of over 6%. This is a strong headwind for our relative performance this year, as the Q² selection is structurally overweight in Europe. But with an average annualized return of 7.5% since 2001, the outperformance of Equities is still a healthy 5% per year.

Our hedged strategy, Aphilion Q² - Balance, booked a net gain of +0.75%, realized with an equity exposure of around 20%. This fund does not hedge the Q² selection directly against the MSCI World, but against the specific regional indices it's actually invested in. As a consequence, regional divergences in performance have no big impact on the fund's performance, as long as our European stocks can outperform the Eurostoxx, and our US holdings can beat the S&P 500. By choosing to hedge the equity market risk using futures, we not only avoid the increasingly illiquid and (in Belgium) highly taxed bond markets, but also remain almost 100% invested in our underlying quantitative equity strategies.

For more information, take a look at the fund fact-sheets (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. And please don't hesitate to contact us for more detailed information.
Thanks for your continued trust and confidence, and we already wish you a merry christmas and an excellent new year,


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