Commentary by the Portfolio Managers
Brummer Multi-Strategy (BMS) is down 3.4 percent month to date (per 13 September), and up 3.5 percent year to date. If the month ends in negative territory, it will be the first negative month for BMS since November 2018.
For a long time, BMS has had low exposure to general moves of the equity market, which is up so far this month. Subsequently, there are other factors that have affected the fund’s performance – about two thirds of the negative performance is attributable to our long/short equity funds and about one third to our trend following funds.
- For our trend following funds, a significantly trending and still profitable position during the year, has been falling interest rates globally. In the beginning of September, the trend reversed sharply and the increasing rates explain a large portion of the losses for these two funds. Moreover, the moves on the power market have had negative consequences for particularly one of our trend following funds. Two separate and distinct events in France and the Netherlands led to swift market moves against the general downward trend, that these markets (French power and Dutch gas) have experienced for a long time. These funds have, in line with our expectations, reduced risk as a result of these market moves.
- Our long/short equity funds, all with very low net exposure to equity markets, have all been affected by severe sector rotations. It is hence the specific selection of stocks, in their long and short books, that have been crucial for performance. The funds have obviously made some changes to their portfolios. However, during the month, there have been extreme moves between sectors and stocks, even though very little has changed with respect to the companies’ fundamentals. Our funds are thus keeping most of their positions, as they believe that fundamental analysis pays off.
As the belief that more monetary policy is the solution to all the world’s problems is fading, markets have become more volatile. At the same time trade wars, geopolitical concerns, and decreasing global economic growth all weigh heavily on the sensitive market sentiment. Larger moves within different market sectors tend to lead to good investment opportunities.
We are confident that we will be able to continue to deliver competitive risk adjusted returns with low correlation to traditional asset classes over time. We are grateful for your confidence.
Kind regards,
Patrik Brummer and Mikael Spångberg
Brummer Multi-Strategy Portfolio Managers