Brummer Multi-Strategy monthly commentary February 2021

MARKETS

Volatility increased in global debt and equity markets in February, fueled by investor concern that stronger growth prospects could lead to a rise in inflation causing central banks to tighten monetary policy support. Despite dovish messages from the Federal Reserve, the 10-year US treasury yield jumped to its highest level in over a year. The rapid sell-off in the bond market pushed equities lower in the second half of the month with growth stocks hit hardest. In commodities, the price of oil continued higher driven by production cuts from major exporters and improving demand. In currencies, rising yields in the US triggered a sharp decline for emerging market currencies. 

STRATEGIES WITHIN BRUMMER MULTI-STRATEGY

Long/short equity strategies Black-and-White and Manticore navigated February’s volatility well, both generating solid alpha on the back of well-received earnings reports. Systematic equity strategy AlphaCrest was also a strong contributor for the month with machine learning models performing particularly well. Systematic trend following strategy Lynx generated significant gains in commodities and equities which offset losses in fixed income and currency markets. Hong Kong based macro strategy Arete profited from successful trading in equities as well as the steepening of the US yield curve. Long/short credit strategy Observatory and machine learning strategy Lynx Constellation both contributed marginally for the month. Systematic trend following strategy Florin Court struggled in February with losses mainly resulting from fixed income positioning. Fixed income relative value strategy Frost was also down for the month with positioning in Swedish fixed income markets the main detractor.  

As of March 1st, BMS’s portfolio managers increased Lynx and AlphaCrest’s allocation while decreasing Observatory’s and Florin Court’s.