Brummer Multi-Strategy monthly commentary January 2022
Brummer Multi-Strategy (BMS) SEK and Brummer Multi-Strategy 2xL (BMS 2xL) SEK posted an estimated return of 0.3 and 0.5 per cent respectively in January (0.3 and 0.5 per cent for the corresponding USD classes).
MARKETS
Monetary policy tightening, inflation and the development of the pandemic remained focal points in January. In the US, the Federal Reserve left rates unchanged although it signalled a first rate hike in March with inflation risks remaining high and falling unemployment numbers pointing to a strong labour market. The prospect of rising interest rates led to a sell-off in equity markets with the tech heavy Nasdaq index hardest hit, falling close to 15 per cent before recovering somewhat at month-end. In fixed income markets, the US 10-Year Treasury yield rose to its highest level since the start of the pandemic, which in combination with a tight US labour market, supported a stronger US dollar. US front-end rates also moved higher with markets pricing in several rate hikes this year. In commodities, production shortfalls and geopolitical tensions in Europe pushed oil prices to their highest level since 2014.
STRATEGIES WITHIN BRUMMER MULTI-STRATEGY
The largest contributor for the month was systematic equity strategy AlphaCrest which had another strong month generating alpha on the back of a volatile month for equity markets. Trend following strategies Lynx and Florin Court both contributed positively. Lynx made gains in commodities and fixed income, which outpaced losses in equities. Florin Court profited from positions in commodities, fixed income and power markets. Financials-focused long/short equity strategy Kersley navigated the month’s volatility well, generating gains from positions in the banking and insurance sectors mainly driven by long alpha. Industrials-focused long/short equity strategy Pantechnicon was marginally down for the month with losses in the material sector outweighing gains from positions in the transportation and automobiles & components sectors around first quarter earnings reports. The tech-focused long/short equity strategy Manticore detracted also marginally. The month’s largest detractor was macro-focused Arete which struggled with equity positioning both in the US and in China.
As of February 1st, BMS’s portfolio managers decreased the allocation to Arete and Manticore and increased the allocation to Kersley and Pantechnicon.
For more information on Brummer Multi-Strategy's performance, please see the tables and graphs below.
