Commentary by the Portfolio Managers
Since the market peak in February, we have witnessed massive stock market sell-offs and reversals of risky assets. The level of uncertainty is higher than in a long time. At the time of writing, Brummer Multi-Strategy (BMS) is down 3.5% and 3.0% for the month and year respectively. Global equity indices are down 20-30%, with no indication that the bottom is reached.
Markets
Financial markets have reacted very strongly and the future will likely be a period characterized by worry and high volatility, given all unanswered questions concerning the real economic effects and the duration of the crisis. The longer it continues, the more the economy and businesses suffer, thus increasing the probability for a recession and other long term consequences.
It is worth remembering that risky assets were priced extremely high prior to both the Coronavirus outbreak and the oil crisis. We have all witnessed an extraordinary decade for financial assets, driven to a large extent of extreme central bank policies. The level of dry powder for the central bank collective was low even before the current wave of sell-offs, hence continued stimuli at these already extreme levels will likely lack in effect. This increases the pressure for and need of fiscal stimuli and measures.
Brummer Multi-Strategy
Prior to the virus outbreak and the problematic oil situation, we decreased our market exposure, e.g., to equities, since we have been sceptic to many artificially high asset prices for quite some time. In this very uncertain period of time, we will stay highly focused on diversification and market neutrality. Periods of stress typically lead to great mispricings both from fundamental and technical perspectives, which normally suite our investment philosophy well. We remain dedicated to delivering strong risk adjusted returns over time at moderate risk.
Patrik Brummer and Mikael Spångberg
Portfolio Managers Brummer Multi-Strategy