Markets

Following the widespread market turmoil that dominated the year’s first quarter, Q2 was capped off in June with the prospect of peace in the Middle East, although markets diverged from one another.

Equity markets saw increased volatility in June as AI optimism drove markets up, with massive gains in semiconductors and tech hardware, only for prices to rapidly fall towards the end of the month as a worldwide sell-off in tech poked holes in said optimism. All in all, US equities detracted for the month following the late-month sell-off, spurred on by downturns in the energy, entertainment and telecommunication sectors. Europe and Asia saw similar developments yet proved resilient thanks to a strong financial sector along with significant gains in healthcare, while Asian markets were further weighed down by weakness in retail shopping and consumer electronics.

Sovereign bond yields moved during the month but ended broadly unchanged across G5 economies, save for shorter term US bond yields with 3-month, 6-month, and 2-year Treasury bond yields which rose sharply. As a result, the US dollar continued to appreciate against most major currencies, with the Dollar Index gaining as much as 2.7 per cent over the month.

The prospect of peace in the Middle East and, more importantly from an economic perspective, the possible reopening of the Strait of Hormuz dominated news cycles throughout June with repeated strikes, ceasefires, and pauses in negotiations causing concern across the globe. As shipping resumed towards the end of the month, crude oil prices fell sharply, falling from the mid-90s to just under 70 USD per barrel. 

Brummer UCITS

With divergent markets and asset prices, the portfolio once again showed its resilience by way of the breadth and diversifying capabilities of its constituent strategies.

The largest contribution to performance came from the market neutral long/short equity bucket where strong themes such as AI and EU financials could be taken advantage of while being hedged against the wide month-end sell-off. In US TMT, significant gains were posted thanks to long positioning in semiconductors and technology hardware as well as short positioning in faltering sectors such as software and media and entertainment. These gains were partially offset by minor losses in consumer retail and telecommunication services. Positioning in European financials also proved fruitful in June, with profitable positioning in banking and financial services being lightly offset by Swiss insurance. Listed real estate detracted somewhat as gains in Japanese and Middle-Eastern real estate names were offset by losses in EU and US based real estate. Positioning in global healthcare sectors contributed negatively to overall performance, mainly attributed to positioning in US biotech and healthcare equipment. 

The convexity bucket also contributed significantly to performance this month. For developed markets trend following, the solid performance could be attributed mainly to FX gains thanks to favourable positioning in the US Dollar, supported by profit in some equity indices and fixed income. On Alternative markets, minor gains in FX and credit were entirely offset by commodity and fixed income positioning, resulting in minor losses.

For discretionary fixed income and macro, the portfolio detracted on relative value macro and curve trades, being offset by some gains in inflation, macro and risk premia trades.

Systematic macro detracted for the month, as gains in FX were entirely offset by detracting positions in equities.

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