Monthly Update: January 2017
When Donald Trump won the presidential election, investors seemed positively giddy about his plans for the US economy. Believing his promises to reduce corporate taxes, curtail costly regulation and increase public infrastructure-spending would boost economic growth, investors drove stock indexes to new all-time highs. Most famously, the 120-year-old Dow Jones Index broke through the psychological 20,000 point milestone. But Trumps seemingly improvised presidency and mercurial tendencies are bound to bring heightened volatility to (individual) stocks, and concerns about protectionism are definitely a cloud on the horizon that could bring stormy weather quicker than anyone imagines.
Our global long only fund Aphilion Q² - Equities (-0.7%) is also hovering near its all-time high. Across all regions, equity markets performed in the range between -1% and +2%, with EM in particular performing strongly. The Q² selection is managed very actively, witness the active share of 94% in Europe, and 96% in the US. It is fair to say we are following our own vision at all times: a management style based on strict discipline, rather than going with the flow or hugging the benchmark. The result has been an average annual outperformance of 5.2% since the launch of the fund in 2001.
Aphilion SIF, our Luxemburg-based equity market neutral hedge fund, had a very calm month of January, adding +0.3%. If we take a deeper look into the weekly performances (454 weeks since inception, with 250 positive market weeks and 204 negative market weeks), we see further evidence that the strategy works well in all types of market circumstances: an average return of +0.24% in positive market weeks, and +0.21% in negative market weeks. The average annualized performance since inception is now at +11%, with annualized volatility at 15%.
Aphilion Q² was mentioned in Belgian daily De Standaard, as one of the funds with the best long term performance among its peers. Every fund can go through a period of sub-par performance, but if we analyze the numbers since the launch, we can definitely perceive that the outperformance of the Q² selection has been robust and consistent. Transforming this outperformance into an absolute return, is exactly what the defensive compartment of our global fund, Aphilion Q² - Balance, is aiming to do. The fund remained stable in January (-0.1%), but is obviously lagging our expectations. With most of its market exposure hedged, the funds performance depends on the relative performance of our stock selection, and this has been sub-par of late. Nevertheless we have no reasons to believe that this is anything more than a temporary setback, and that our long-term track record is a better gauge of the future potential of Balance... to be continued!