Brummer Multi-Strategy monthly commentary May 2021
Brummer Multi-Strategy (BMS) SEK and Brummer Multi-Strategy 2xL (BMS 2xL) SEK posted an estimated return of -0.3 and -0.8 per cent respectively in May (-0.4 and -0.7 per cent for the corresponding USD classes).
MARKETS
Focus on inflation risks increased in May as the economic recovery continues to gather pace while risks surrounding the pandemic appeared to recede. Higher consumer prices were largely dismissed by the Federal Reserve as transitory and a result of heavy fiscal stimulus as well as supply-chain bottlenecks. A disappointing payrolls print further decreased pressure on the US central bank to begin discussing tapering of its asset purchases. The US 10Y Treasury yield remained fairly stable during the month and oscillated around 1.6 per cent. High-value tech stocks were most affected by the inflation concerns before recovering during the second half of the month. In currency markets the US dollar weakened somewhat while cryptocurrencies witnessed a month of extreme volatility following a crackdown on bitcoin’s use as a currency by Chinese authorities. Commodity prices continued higher in May fueled by strong demand from China with iron ore and copper reaching record highs.
STRATEGIES WITHIN BRUMMER MULTI-STRATEGY
Trend following strategies Lynx and Florin Court were both solid contributors for the month with FX and commodity positioning the main contributors for the former while the latter made money across sectors with power the most profitable. Systematic equities strategy AlphaCrest had another good month navigating the month’s volatility well. Machine learning strategy Lynx Constellation made money on commodities, FX and rates positioning. Long/short equity strategy Black-and-White was the month’s main detractor and struggled with sector rotations and negative alpha during earnings season. Macro focused Arete was marginally down for the month with positioning in equity indices whipsawed. Long/short credit strategy Observatory, fixed income relative value strategy Frost and long/short equity strategy Manticore were all essentially flat for the month.
As of June 1st, BMS’s portfolio managers increased the allocation to AlphaCrest and Lynx and decreased the allocation to Black-and-White, Manticore and Observatory.
