Brummer Multi-Strategy monthly commentary January 2023
Brummer Multi-Strategy (BMS) SEK and Brummer Multi-Strategy 2xL (BMS 2xL) SEK posted an estimated return of 0.6 and 0.8 per cent respectively in January (0.7 and 1.0 per cent for the corresponding USD classes).
MARKETS
US and European equity markets rose in January. Market sentiment shifted to risk-on following rising hopes of a plausible soft-landing for the US economy and a slower pace of rate hikes from the Federal Reserve. Easing inflation print in the US boosted markets, as did US GDP numbers showing the economy slowed but were more resilient than expected in the fourth quarter of 2022. The inflation in the euro zone also showed signs of easing as well as cooling energy prices and a reopening in China, fuelling optimism of a milder economic slowdown. The Federal Reserve and European Central Bank however, maintained a hawkish tone signalling continued tightening. Global bond markets rebounded in the first half of the month with rising bond prices. Natural gas prices continued to fall while oil prices traded higher during the month in commodity markets. In currency markets, the US dollar index weakened while the euro strengthened against the US dollar.
STRATEGIES WITHIN BRUMMER MULTI-STRATEGY
BMS’s January return was positive with the largest contribution coming from long/short equity. Long/short equity generated positive contribution across all teams with the most notable gains realised in the US TMT sectors stemming from strong alpha both on the short and long side. Stock-picking in global industrials, European financials and Nordic/European tech sectors were also profitable with good long alpha. The contribution from systematic trend following was negative in total and was the month’s only detractor. Losses were concentrated to rates, primarily driven by short positions in bonds in developed markets. Gains were captured in credits, currencies and power markets but was not sufficient to offset the losses. Systematic macro contributed marginally positively, profiting from relative value positioning in both developed and emerging markets. Equities and commodities led performance while losses from rates and currencies weighed on the total contribution.
As of February 1st, BMS’s portfolio managers increased the allocation to long/short equity, adding a market neutral long/short sector specialist team focused on the health care sector, and decreased the allocation to systematic trend.
