Monthly Update: August 2017
Geopolitical news dominated headlines in August, obscuring positive economic releases that reflect the continuing synchronized global expansion. According to a recent article in the Wall Street Journal, 45 countries tracked by the OECD are all expecting positive growth this year, with 33 economies poised to accelerate from a year ago. That's the most countries in acceleration mode since 2010 and how the central banks react to this acceleration will be one of the main themes in the markets the coming months and in 2018.
Our long/short equity market neutral fund Aphilion SIFmaintained its upward trajectory since the implementation of the new portfolio construction rules (higher number of portfolio positions, more frequent rebalancing). The fund gained 2.8% in August, bringing the ytd return to -6.8%. The fund now consists of 203 positions, with weights ranging from -3.8% to +3.7% (inverse volatility weighted). Average gross exposure at the end of August was 470%.
Our long only Aphilion Q² - Equities slightly underperformed global equity last month (-1.1% vs. -0.6%), bringing relative performance for the year to +1.1%. The Eurostoxx 600 also lost 1.1% for the month, while US stocks limited the damage to half a percentage point (in €). The fund's year-to-date return is drifting around zero now, and the average yearly return since inception is +7.4%.
The underperformance of the Q² selection was reflected in a negative showing for Aphilion Q² - Balance, which lost 0.6% over the month. Market exposure is almost completely hedged in this fund so its performance depends on our stock selection outperforming. That has been somewhat lacking recently, but we remain confident that the long term outperformance our methodology has shown over the past 15 years will eventually manifest itself in a positive showing for Balance. As a defensive fund it has all the necessary ingredients to be a worthy alternative for investors looking to decrease their market exposure, without giving up on our active quantitative methodology.