Brummer Multi-Strategy monthly commentary June 2022
Brummer Multi-Strategy (BMS) SEK and Brummer Multi-Strategy 2xL (BMS 2xL) SEK posted an estimated return of 0.6 and 1.2 per cent respectively in June (0.7 and 1.3 per cent for the corresponding USD classes).
MARKETS
June was an eventful month as weak economic data heightened fears that central bank action in taming inflation will send the global economy into a recession. Upward inflation pressure continued as several countries saw numbers for May coming in at multi-decade highs. Several central banks in developed markets, including the Federal Reserve, the Swiss National Bank and the Bank of England announced rate hikes with the Fed announcing an increase of the size not seen since 1994. The European Central Bank signalled they intend to lift interest rates in July and potentially in September, while it also arranged an unscheduled meeting to discuss member countries’ borrowing costs. Global equities saw broad based declines with many market indices falling below minus 20 per cent year-to-date, entering bear market territory. In commodity markets volatility was fuelled by supply and demand concerns caused by various factors such as sanctions on Russia and Iran, China’s Covid policy and production capacity limitations. In fixed income markets, bond prices rallied during the second half of the month as concerns over a potential recession increased. In currency markets the Japanese yen weakened to a new 20-year low against the US dollar, while the US dollar index continued to strengthen as markets priced in higher interest rates in the US. Meanwhile growth and inflation concerns pushed the euro and British pound lower in general.
STRATEGIES WITHIN BRUMMER MULTI-STRATEGY
BMS’s positive return in June was largely generated by the trend following strategies that extended their recent run of positive performance. The largest contribution for the month came from developed market trend following which profited primarily from gains in fixed income and equity positioning, outweighing smaller losses in commodities. Exotic market trend following profited primarily from short positioning in emerging market rates and credit and long positions in power. The long/short equity strategies saw gains from stock-picking in global industrials and Nordic/European tech, finishing June with strong alpha particularly on the short side. Long/short equity strategies focused on the US tech sector and the European financials sector struggled, both contributed negatively while the former was the largest detractor for the month. Systematic macro ended the month down with losses in currency trading, fixed income and commodities, outpacing gains generated from equities. Systematic equity also contributed negatively. Discretionary macro was flat for the month with gains in rates and currencies offsetting losses in equities.
As of July 1st, the portfolio managers increased the allocation to the long/short equity strategies focused on financials and industrials. At the same time, allocation was reduced by slightly less than 50 per cent to discretionary macro, in line with the previously announced decision that BMS will fully redeem from the strategy. A lower allocation was also given to the US tech focused long/short equity strategy.
For more information on Brummer Multi-Strategy's performance, please see the tables and graphs below.
