Noteworthy Developments

Global equities, as represented by the MSCI ACWI Index, increased 3.7% with sharp dispersion in regional performance.

Global Equities

Global equities increased by 3.7%, with US large-cap equities (S&P 500) performing strongly at 5.8% while international developed (-0.5%) and emerging market equities (-3.5%) delivered negative returns. US equities were bolstered by Donald Trump’s win in the presidential election coupled with the Republican party sweeping Congress. Investors favored US stocks with sentiment driven by the potential implementation of pro-growth policies for the US economy (less regulation, lower taxes). Conversely, investors feared that international markets may suffer if Trump’s tariffs plans are enacted. Additionally, currency movements hurt USD returns for international markets as the USD strengthened further versus most currencies.

Globally, growth (4.3%) and value (3.1%) stocks performed relatively inline. Cyclical stocks outperformed defensive stocks, and the consumer discretionary and financials (7.4% and 6.5%) sectors performed best while the healthcare sector performed worst at -1.0%. US Small Cap stocks rallied significantly and were up 11.1% with strong performance driven by optimism surrounding the incoming administration’s perceived pro-growth economic policies (US small caps earnings are more domestically focused relative to large caps and are thus more influenced by changes in US macro-economic conditions).

Fixed Income

The US Aggregate Bond Index appreciated 1.1% with declines in interest rates augmenting coupon interest. US government bonds were up by 0.8% while investment grade corporate bonds were up by 1.3%. Bond yields declined by 10bps across various maturities with higher volatility intra-month driven by the US presidential election. High-yield bonds appreciated by 1.1% as high coupon rates were augmented by declines in base interest rates. Leveraged loans were up 0.8%, with high coupon income driving returns.

Alternatives

The HFRX Global Hedge Fund Index increased by 0.8%, with most strategies delivering positive returns. Convertible arbitrage and Global macro / trend following strategies performed best (2.2% and 1.5%) while event-driven strategies performed worst at -0.1%.

Manager Comments

Alphadyne: 2.9%:

Outperformed the HFRX Global Index (0.8%) due to successful relative value bets within the longer-dated portion of the US Treasury curve coupled with successful directional bets with regards to Japanese interest rates.

Linden: 2.0%:

Outperformed the HFRX Global Index (0.8%) due to a combination of new convertible bond issuances on favorable terms, participating in several refinancing again on favorable terms, and benefiting from compression in credit spreads.