Markets

Coming off the back of April’s exceptional recovery, May saw wide market dispersion as the ongoing conflict in the Middle East and momentum in the tech-sector made their mark on asset class performance. 

US equities saw exceptional performance in May, almost exclusively carried by wide earnings-related momentum for technology sectors such as semiconductors, software and technology hardware. Alarmingly, other sectors struggled, particularly energy dependent sectors, pointing to the ever-growing dispersion between tech and other sectors in equity markets. In mainland Europe, equity performance was also driven mainly by tech, aided by a strong banking sector. UK equity markets struggled somewhat, mainly attributable to elevated bond yields amid political turmoil following the local elections’ disappointing results for the ruling Labour party. Eastwards, Japanese and Korean markets rallied heavily, again driven by their respective semiconductor and tech industries. 

Bond yields continued to move in tandem with crude oil prices, with G10 yields following a similar curve to the crude oil price and reaching multi-year highs only to fall off some post mid-month. The US, however, saw yields remain elevated on the back of increased inflation, causing the US dollar to appreciate against all major currencies, including the Euro, British Pound and Japanese Yen.  

Crude oil prices remained elevated throughout the month, with some gains following hostile rhetoric from both the US and Iran. Some levity came towards the end of the month as markets priced in a deescalation of the conflict and potential ceasefire agreement, causing the price of Brent crude oil to fall below 100$ per barrel. The Strait of Hormuz remains closed, however.  Natural gas prices climbed throughout the month, as weather forecasts indicate above-normal temperatures for June, increasing the likelihood of higher gas consumption in order to meet air-conditioning demand. Elsewhere, copper prices rose as supplies tightened and production weakened in Chile.  

Brummer UCITS

Amid market volatility, the portfolio ended roughly flat for the month yet proved resistant to the unexpected market moves, exemplifying the value of the Brummer Multi-Strategy´s programme’s diverse sub-strategies. 

The largest contribution to the portfolio came from systematic trend following strategies. On developed markets, favourable long positioning in Asian equity indices as well as the US dollar more than offset detractions brought on by fixed income positioning. As for alternative markets, profits were reaped through positions in Asian equities, EU credit and FX which were offset by some losses in commodities and fixed income. 

Systematic macro detracted for the month, mainly driven by losses in FX and equity indices. 

The long/short equity bucket was the largest detractor, mainly driven by positioning in US TMT sectors where gains in semiconductors, technology hardware and media names were more than offset by losses in software corporations. The portfolio did see some gains in global healthcare sectors, namely through positioning in pharmaceuticals and biotech, which were lightly offset by positioning in household products. Listed real estate saw profits generated thanks to European Real Estate Investment Trusts (REITs) while real estate management corporations detracted some. In European financials, gains were realised thanks to positioning in the banking sector, supported by some positioning in insurance names. 

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