So it's actually happening: a majority of UK voters has decided they want to leave the EU... As we wrote in our previous update: this is a momentous event, for the UK and Europe, and the markets responded in kind. There's not just the 'leave' vote, but also a huge amount of uncertainty surrounding how/when/if the whole process will unfold. Whereas uncertainty usually makes things worse in financial markets, this time it seems to be a net positive: lots of people are doubting whether the UK really will ever leave the EU as a result of the referendum, and lots of other countries (or at least the 50+% of their population sceptical of the EU, will think twice before deciding that a EU-exit provides an easy and straightforward solution.
Global equity lost a little over 1% for the month, nothing very special, but the Brexit theme dominated proceedings: in euro terms US stocks gained 0.3%, while European stocks lost 5.1% and British stocks 5.7%. The widening gap between Europe and the US (more than 10% ytd in euro terms!) is a big headwind for the relative performance of our long only fund Aphilion Q² - Equities. The fund is structurally overweight in Europe (about 45%, vs. 25% in the MSCI World) for a variety of reasons we've mentioned before: the main ones being that our strategies perform better in Europe and that our work-hours coincide with European trading hours. So, all in all, the -1.2% performance in June (lagging MSCI World by 0.15%) was perhaps the best we could hope for.
That our hedged strategy,Aphilion Q² - Balance, managed to eke out a a gain of .2% despite falling markets and slight underperformance, has to do with the specifics of the equity hedge in place. We don't hedge directly against the MSCI World but against the specific regional indices we're actually invested in. That means regional divergences in performance don't influence fund-performance, only the relative performance of the stock selection, and this performance was good in June (as also witnessed in the SIF's strong performance).
More information can be found in 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.
Thanks for your continued trust and confidence in the team,