Monthly commentary BMS December 2018
For the month of December Brummer Multi-Strategy (BMS) SEK delivered an estimated return of 0.9 per cent (1.2 per cent for the USD class) bringing the full year estimated return to -1.9 per cent (0.8 for the USD class). December was in general yet another month with selloffs across various risky assets, S&P 500 for example being down 9.2 per cent.
Our long/short equity funds all posted positive returns. In particular, Black-and-White stands out with an estimated monthly return of 4.6 per cent, mainly driven by short alpha. Exotic trend-follower Florin Court also had a strong month and was up 3.8 per cent. Lynx and AlphaCrest were also up on the month, while our discretionary macro and fixed income-oriented funds struggled.
The last quarter of 2018 was tough for our funds and hence also for BMS. We have previously mentioned that one of our objectives when managing BMS is to avoid losses greater than 3 per cent in a month or 5 per cent in a quarter. Following the onset of recent market turbulence, we have focused on creating a more defensive portfolio, trying to limit further drawdowns. The fund’s beta and net exposure to the equity markets have both been hovering around zero throughout the month.
In earlier comments we also mentioned the medium to long term outlook and the probability of an equity bear market. Drawdowns, since the peak this year at -18 per cent (since the end of January) for Euro Stoxx 50 and -14 per cent (since the beginning of October) for SP500 are indeed supporting that a shift in the global economic environment is taking place, potentially reaching a bear market scenario.
Market regime shifts tend to cause problems for many investors and we are naturally not satisfied with our performance in this possible transition period so far, causing a negative year end result for the BMS SEK fund and only a slightly positive result for the USD class. Regardless of if we end up in a true bear market or not, we believe our hedge fund mandate provide us with the necessary tools to adapt and deliver absolute returns to our clients.
