Noteworthy Developments: Global equities advanced in January led by strong gains in both emerging and international developed markets.
Global Equities: Global equities rose 3.0% during January, as measured by the MSCI ACWI Index. US large-cap equities (S&P 500) gained 1.4%, while international developed equities rose 5.2% and emerging market equities advanced 8.9%.
International developed equities benefited from out-performance from cyclical sectors in both Europe and Japan, supported by improving economic sentiment. Emerging markets also delivered strong gains with Korean equities (+25.3%) up strongly given high exposure to memory semiconductor stocks which were up 35%-40% driven by buoyant AI data center demand.
Globally, style leadership shifted meaningfully during the month. Value stocks rose 5.2% and significantly outperforming growth stocks, which gained 0.7%. Sector performance reflected this rotation, with cyclicals sectors such as energy (+11.7%), materials (+9.8%), and industrials (+6.8%) among the strongest performers, whereas technology (+0.3%) performed much worse.
In the US, small-cap stocks (+5.5%) outperformed large-caps (+1.4%) given small caps’ earnings higher sensitivity to macro-economic conditions. Within US large-caps, software stocks (-14.6%) were hit especially hard given fears regarding AI disruption to lucrative entrenched business models.
Fixed Income : The US Aggregate Bond Index rose 0.1% during January. US Treasuries declined 0.1% with coupon income offset by price declines driven by modestly higher bond yields across the curve. Investment grade corporate bonds posted modest gains (+0.2%). Tighter credit spreads offset some of the base rate yield increases. Riskier credit was a tale of two cities. High yield bonds were up 0.5% and benefited primarily from coupon income. Leveraged loans were down 0.3% as coupon income was more than offset by price weakness (especially with software sector related loans).
Alternatives: Hedge funds delivered solid gains in January, with the HFRX Global Hedge Fund Index rising 2.0%. Performance was broadly positive across strategies, led by macro / trend following strategies (+4.0%), convertible arbitrage (+2.5%) and equity hedge strategies (+2.3%).
Manager Comments:
Linden: +4.2%: The fund benefited from a strong environment for convertible arbitrage strategies with high new issuance and refinancings coupled with high volatility especially in the technology sector. In addition, Linden utilized its scale advantage to drive superior terms on new issuances as well as refinancings relative to peers.
Eminence: -2.4%: Underperformed relevant benchmarks (MSCI World Index and S&P Mid-cap Index) due to idiosyncratic declines from various core positions.
USD January Market Commentary
Noteworthy Developments: Global equities advanced in January led by strong gains in both emerging and international developed markets.
Global Equities: Global equities rose 3.0% during January, as measured by the MSCI ACWI Index. US large-cap equities (S&P 500) gained 1.4%, while international developed equities rose 5.2% and emerging market equities advanced 8.9%.
International developed equities benefited from out-performance from cyclical sectors in both Europe and Japan, supported by improving economic sentiment. Emerging markets also delivered strong gains with Korean equities (+25.3%) up strongly given high exposure to memory semiconductor stocks which were up 35%-40% driven by buoyant AI data center demand.
Globally, style leadership shifted meaningfully during the month. Value stocks rose 5.2% and significantly outperforming growth stocks, which gained 0.7%. Sector performance reflected this rotation, with cyclicals sectors such as energy (+11.7%), materials (+9.8%), and industrials (+6.8%) among the strongest performers, whereas technology (+0.3%) performed much worse.
In the US, small-cap stocks (+5.5%) outperformed large-caps (+1.4%) given small caps’ earnings higher sensitivity to macro-economic conditions. Within US large-caps, software stocks (-14.6%) were hit especially hard given fears regarding AI disruption to lucrative entrenched business models.
Fixed Income : The US Aggregate Bond Index rose 0.1% during January. US Treasuries declined 0.1% with coupon income offset by price declines driven by modestly higher bond yields across the curve. Investment grade corporate bonds posted modest gains (+0.2%). Tighter credit spreads offset some of the base rate yield increases. Riskier credit was a tale of two cities. High yield bonds were up 0.5% and benefited primarily from coupon income. Leveraged loans were down 0.3% as coupon income was more than offset by price weakness (especially with software sector related loans).
Alternatives: Hedge funds delivered solid gains in January, with the HFRX Global Hedge Fund Index rising 2.0%. Performance was broadly positive across strategies, led by macro / trend following strategies (+4.0%), convertible arbitrage (+2.5%) and equity hedge strategies (+2.3%).
Manager Comments:
Linden: +4.2%: The fund benefited from a strong environment for convertible arbitrage strategies with high new issuance and refinancings coupled with high volatility especially in the technology sector. In addition, Linden utilized its scale advantage to drive superior terms on new issuances as well as refinancings relative to peers.
Eminence: -2.4%: Underperformed relevant benchmarks (MSCI World Index and S&P Mid-cap Index) due to idiosyncratic declines from various core positions.
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