September, 2023
The option aims to maximise diversification by spreading risk evenly across three uncorrelated investment themes; Momentum, Carry and Value, with no single theme dominating the return profile. The strategy employs a quantitative process to determine a view of the opportunities across the three investment styles. By maintaining a comparatively small exposure to any individual contract, Aspect achieves sector and contract diversification, thereby exploiting a wide range of opportunities and maximising expected long-term risk-adjusted returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fs7191-3.pdfAugust, 2023
The option aims to maximise diversification by spreading risk evenly across three uncorrelated investment themes; Momentum, Carry and Value, with no single theme
dominating the return profile. The strategy employs a quantitative process to determine a view of the opportunities across the three investment styles. By maintaining a
comparatively small exposure to any individual contract, Aspect achieves sector and contract diversification, thereby exploiting a wide range of opportunities and maximising
expected long-term risk-adjusted returns.
July, 2023
The option aims to maximise diversification by spreading risk evenly across three uncorrelated investment themes; Momentum, Carry and Value, with no single theme dominating the return profile. The strategy employs a quantitative process to determine a view of the opportunities across the three investment styles. By maintaining a comparatively small exposure to any individual contract, Aspect achieves sector and contract diversification, thereby exploiting a wide range of opportunities and maximising expected long-term risk-adjusted returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fs7191-1.pdfJune, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fs7191.pdfMay, 2023
Markets monitored US debt ceiling negotiations for signs of progress, as fears of a potential default in the US weighed on risk sentiment which supported the US dollar. The Federal Reserve and other major central banks continued their efforts to fight inflation by each issuing widely anticipated rate hikes of 25bps. The outlook for the end of the rate-hiking cycle remained murky. US inflation showed signs of moderating, but the US job market demonstrated it remains very strong. Meanwhile disappointing Chinese economic indicators suggested a flagging economic recovery and Germany fell into technical recession.
The euro was central to the Fund's currency returns this month. The strategy managed to capture euro strength against the Swedish krona and euro weakness against the British pound. Widening rate differentials between Europe and Sweden, resulted in persistent Swedish krona weakness. Conversely the British pound strengthened against the euro as a relatively higher UK inflation implied a more hawkish Bank of England. The Fund incurred losses from stock indices, predominantly from long European stock indices exposures, as prices fell on signs that the economic outlook may be worsening. Losses also came from the Fund's long position in the Canadian TSE 60 index as commodity prices fell and data showed Canadian consumer inflation unexpectedly rose for the first time in a nearly a year.
Performance from the Fund's net short energies exposure came from short positions across natural gas markets, as both supply glut and low demand worries pushed prices lower. Concerns about the health of the global economy contributed to oil demand pessimism, which also led to gains from the Fund's short WTI crude oil position. In agriculturals, profits were largely driven by the Fund's short position in lean hogs as prices continued to slide in response to poor demand for US pork. Elsewhere in commodity markets, the Fund's net short exposure to base metals generated modest gains. Relatively subdued metals demand from China as well as weak Chinese economic data for April, weighed down on prices.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-20.pdfApril, 2023
Continued signs of stress amongst US regional banks cemented investors' expectations of recession, as lenders tightened credit conditions in the face of rising rates, exiting deposits and higher risks of defaults. Market-implied policy rates suggested a final 25bps hike at the upcoming Federal Reserve's meeting in May, followed by rate cuts in the second half of this year.
Within the Fund's most profitable sector, currencies, the Fund's net long exposure to the euro against the Norwegian krone led gains. The Nordic currency weakened as the Norges Bank continued to sell its domestic currency to fund the Government Pension Fund of Norway. Widening rate differentials and oil price weakness also weighed on the currency. The Fund's long exposure to the euro against the Japanese yen was also profitable. Stubbornly high inflation, strong wage growth and the lack of a recession this winter in Europe have given the ECB room to hike. This has been supportive for the euro against the Japanese yen, particularly given the BOJ's pursuance of yield curve controls. The Fund sustained a small loss across its net short exposure to bonds, as yields fell slightly on expectations of a more dovish Federal Reserve policy stance ahead.
Across commodities, the majority of the Fund's gains came from agriculturals. Sugar prices rallied extensively as poor weather in sugar producing country India constrained supply, and increased production of ethanol—a biofuel made using sugarcane juice—supported demand. The Fund also made gains from its short positioning in wheat which came under pressure due to prospects of bumper crops in the Americas.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-19.pdfMarch, 2023
Market consensus abruptly changed direction in response to the failure of Silicon Valley Bank, the largest bank failure since Washington Mutual in 2008. The news fuelled fears of contagion risk in the global banking sector and highlighted the potential difficulties rising interest rates could pose to economies. As a result, the fixed income sector experienced extreme volatility as government bond yields posted their largest daily fall in decades.
Prior to the shift in sentiment, the Fund made gains from appropriately sized and intuitive positions based on the enduring interest rate hiking cycle narrative. However, the extraordinary reversal in fixed income yields over a handful of days began to dominate losses. The Fund's systematic measures of risk and faster trend filters responded swiftly to the sudden increase in volatility and change in trend direction. As the interest rate risk shock subsided, performance started to recover slightly towards the end of the month.
Losses came primarily from financial markets, particularly in the fixed income sector as short positions were impacted by the drop in government bond yields. The stock market sell-off caused by banking sector fears and a flight to safety, resulted in losses for the Fund's long positions. In commodity markets, prices in general fell as economic uncertainty weighed on demand. The Fund's net short exposure in the energy sector generated gains, particularly from a short position in Natural Gas.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-18.pdfFebruary, 2023
Despite continued hawkish rhetoric from the Federal Reserve and European Central Bank, risk assets rallied and bond yields fell as cooling inflation raised hopes of a reduction in the size of future rate rises. The positive sentiment in financial markets was further boosted by the reopening of China's economy following a relaxation of Covid restrictions and by unusually mild weather in Europe, which helped the region to avoid an energy crisis over the winter.
The Fund's net short fixed income exposure incurred the majority of losses during the month. Government bond prices rose in unison due to an expected shift in the pace of rate hikes. In currencies, the Fund's net long exposure to the euro resulted in gains, as there were hopes that moderating energy prices could help Europe avoid a severe recession. The Fund made a small gain in stock indices, as it increased its net exposure in response to an upward trend in the sector.
In commodities, the Fund's gains in energies came from short positions in natural gas markets, where prices fell sharply due to high European inventory levels and a reduction in demand. The agriculturals sector made a small loss, notably from a short position in coffee, as prices increased due to supply concerns. In metals, the Fund's net short exposure at the start of the month led to losses as prices rose in response to a weakening US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-17.pdfJanuary, 2023
Despite continued hawkish rhetoric from the Federal Reserve and European Central Bank, risk assets rallied and bond yields fell as cooling inflation raised hopes of a reduction in the size of future rate rises. The positive sentiment in financial markets was further boosted by the reopening of China's economy following a relaxation of Covid restrictions and by unusually mild weather in Europe, which helped the region to avoid an energy crisis over the winter.
The Fund's net short fixed income exposure incurred the majority of losses during the month. Government bond prices rose in unison due to an expected shift in the pace of rate hikes. In currencies, the Fund's net long exposure to the euro resulted in gains, as there were hopes that moderating energy prices could help Europe avoid a severe recession. The Fund made a small gain in stock indices, as it increased its net exposure in response to an upward trend in the sector.
In commodities, the Fund's gains in energies came from short positions in natural gas markets, where prices fell sharply due to high European inventory levels and a reduction in demand. The agriculturals sector made a small loss, notably from a short position in coffee, as prices increased due to supply concerns. In metals, the Fund's net short exposure at the start of the month led to losses as prices rose in response to a weakening US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-16.pdfDecember, 2022
The Fed issued a widely anticipated 50 percentage point rate hike, as signs pointed to slowing inflation, whilst retaining a hawkish tone that echoed that of other major central banks. Stock markets finished the month down, capping a year of sizeable losses that have been fuelled by aggressive rate hikes from many central banks in a bid to fight soaring inflation. December saw major US stock indices record their worst one-year declines since the 2008 financial crisis as a result. Yields on government bonds broadly continued their upward trend; the US ten-year yield closed out the trading year with its largest annual increase in decades. In commodities, positive market sentiment grew from China's easing of COVID restrictions, despite rising cases.
The Fund's net short bond exposure was profitable as global government bond yields followed the US' trend higher. Losses from the Fund's long positions in stock indices outweighed gains from short positions, leading to losses from the sector. Profits from currencies were muted.
The Fund generated positive performance in energies particularly from short positions in European natural gas, as warmer than usual weather has helped preserve reserves and put downward pressure on prices. The Fund struggled to generate performance in the other commodity sectors as losses from shorts outweighed gains from long positions as commodity sentiment increased amid China's reopening.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-15.pdfOctober, 2022
Broad-based acceleration in core inflation continued as CPI prints from major regions arrived above consensus and the European Central Bank delivered another widely expected 75 bps rate hike. As the month progressed, there were some reversals in previous trends amid speculation that central banks may consider reducing the pace of rate hikes in order to maintain stability in the global financial system. This view was bolstered by smaller than expected rate hikes in Australia and Canada and signs of cooling US labour demand. UK's U-turn on fiscal tax cuts and appointment of new Prime Minister Rishi Sunak were well received by markets but uncertainties around financial and energy crises ahead of winter remained throughout Europe.
Some sovereign bond yields temporarily paused their ascent and bonds rallied during the second half of the month as investor hopes grew for a year-end Federal Reserve pivot, seen to be necessary to avoid monetary overtightening. Despite this, short positioning in longer dated US Treasuries made gains. In currencies, the US dollar retreated, particularly against the Euro after economic data such as housing and manufacturing started to reflect the impact of monetary tightening so far. The yen weakened on policy divergence and attempts at currency interventions. Gains came from the Polish zloty which firmed against the euro amid risk-on sentiment and the pause in rising gas prices. Third quarter earnings season began better than expected and this boosted developed market equities leading to gains from long positioning. Meanwhile, Chinese stock markets faltered amid renewed COVID lockdowns and short positioning made gains.
Gains were made in energies as oil prices rallied amid tight supply as OPEC+ agreed to cut production by 2 million barrels per day whilst global gas prices tumbled amid unseasonably warm weather. In agriculturals, coffee futures fell linked to improving weather for Brazilian coffee crops and globally weakening demand for many major commodities. In metals, precious metals staged a late rally on the back of lower yields and a weaker dollar, boosting the appeal of the non-interest-bearing assets and this led to losses in silver positioning.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-14.pdfSeptember, 2022
The US Fed issued its third consecutive 0.75% hike, kicking-off a week of dramatic announcements from central banks and making September experience one of the most sudden shifts in global economic policy in decades. The synchronised and sharp interest rate increases marked the end of an era of negative rates in Europe, leaving Japan as the only country to have negative rates. In a bid to tame inflation, Japan intervened to strengthen the yen for the first time since the late 1990s. By the end of the month, the UK's newly appointed government had unveiled a fiscal plan that plunged UK gilt prices into chaos and threatened financial stability, forcing the Bank of England to lend support via temporary quantitative easing.
The Fund continued to generate strong performance from short fixed income positions, particularly in US Treasuries, as yields rose in line with the Fed's hawkish rhetoric and rate hike. The short UK 10Y Gilt position was one of the Fund's top performing assets as the UK government's tax cuts triggered a record stampede out of UK government bonds and the largest UK 10Y Gilt yield rise in 40 years. In stock indices, short positions made gains as the sector continued to be plagued by recessionary fears. Most notable in currencies was the strength of the US dollar. The Fund's net long exposure to the currency profited as the US dollar index rose to yet another twenty-year high on macroeconomic uncertainty and relative monetary policy aggression from the Fed.
Losses came from the Fund's positioning in commodity markets, particularly the long energies exposure. Dollar-denominated commodities came under price pressure from the soaring US dollar and more broadly the sector endured growing fears demand could soften if central banks continue to hike rates to the point of economic recession.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-1-3.pdfAugust, 2022
The Fund returned 1.79% in August. Many of the prominent macro themes present throughout the year made no attempt to subside during August, namely: recessionary fears, the battle against runaway inflation and a European energy crisis. The continued efforts of central banks globally to control inflation and the associated repercussive effects on markets caused sovereign bond yields to resume their ascent upwards, whilst equities pared their multi-week advance, ultimately finishing the month lower.
In financials, the stock indices sector led gains, mainly from short exposures, as equity bourses felt the effects of a market fearful of recession. In bonds, US Treasury yields initially rose following positive economic data releases but were propelled higher by hawkish comments from Fed Chair Jerome Powell during the annual Jackson Hole symposium at the end of the month. Other bond yields behaved similarly, further highlighting the global nature of the difficulties faced. The shift higher in yields led to positive performance from the Fund's short fixed income positions. The anticipation of additional rate hikes from the Fed also led the US dollar to gain against most major peers benefitting the Fund's net long exposure.
In commodities, gains were generated in short metal positions as recessionary fears stoked demand concerns, dragging prices lower. Whereas the agricultural and energy sectors were loss making. Performance by theme: momentum and carry were positive, whilst value detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-13.pdfJuly, 2022
Global economic growth concerns intensified as the world's largest economy contracted for a second consecutive quarter, an inverted US Treasury yield curve signalled a possible
impending recession, and business data from major nations surprised on the downside. The gloomy outlook led investors to predict that the pace of rate hikes by central banks would need to be scaled back, despite persistently rising inflationary pressures. The Fund's net short exposure in bonds caused the majority of losses, as safe-haven demand increased for the asset. Stocks rallied even with the recessionary headwinds as a projected slowdown in rate rises increased optimism, leading to losses for the Fund's net short stock indices exposure. In the currencies sector, the euro reached parity against the
US dollar as the European Central Bank was forced to stay as dovish as possible to counter economic shocks from the war in Ukraine. The Fund profited from short positions in the euro as the currency weakened. Overall returns from commodity sectors were generally muted. However, some gains were captured in energy markets, most notably from the Fund's long position in natural gas whose price was bolstered by record high temperatures across the United States. While in Europe, German power costs accelerated higher as Russia restricted gas flows into the region due to the ongoing energy stand-off, benefiting the Fund's long position.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-12.pdfJune, 2022
Stock markets suffered some of their sharpest falls in months during the initial weeks of the period before staging a partial comeback, somewhat paradoxically on poor data releases. After major central banks continued their unanimous rate hikes with increasing aggressiveness, including a 75bps rate rise from the Federal Reserve, gauges of economic strength registered lower causing a rally in equities whilst simultaneously sending yields lower as fears of overtightening dissipated.
The Fund's short positioning in fixed income continued to be a dominant driver of positive performance. The ongoing task of central banks globally to stave off runaway inflation led to further rate hikes which in turn lifted sovereign yields. However, like stock indices, bond yields also partially retraced their movements in the second half of the month. Even with the late-stage recovery, US equities still registered their worst decline in the first half of a year in decades. Other regions fared similarly as the possibility of recession weighed heavily on investor sentiment resulting in gains from the Fund's short positions. In currencies, US dollar strength showed little signs of abating in June aiding the Fund's well established long position.
Unlike their financial counterparts commodity markets proved more challenging. Prices wavered but predominantly moved against prior trends as global growth concerns curtailed demand expectations. Improved growing conditions in markets also added downward pressure to agricultural prices, hurting the Fund's long positions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-11.pdfMay, 2022
Forceful market gyrations coincided with investors questioning whether the US economy would remain as robust and monetary policy as aggressive as previously imagined.
Recession fears stoked flights to safety however some of these moves were offset by a resurgence in risk appetite later on in the month. Elsewhere, the European Central Bank signalled the end of negative interest rates by the end of the third quarter as inflation continued to surge. Energy supply concerns persisted with the European Union's proposal to ban Russian oil imports.
Global sovereign yields fluctuated between safe haven demand linked to growth slowdown prospects and tough inflation data, and this ultimately resulted in gains from short fixed income exposures. Despite touching a 20-year high, the US dollar index declined amidst softer US economic data whilst the Euro rallied on hawkish monetary policy leading to some losses.
Rallies in Latin American currencies led to profitable long exposures amid strong economic activity in the face of concerted monetary tightening. After a lengthy losing streak, stock markets staged a late comeback following reports that US inflation rates may be slowing, and optimism associated to easing lockdowns in China. In commodities, seasonally heightened demand for cooling and US domestic transportation alongside below-average inventories boosted long natural gas and reformulated gasoline positions respectively. Global growth anxiety kept a lid on industrial metals, resulting in losses for long metals exposure.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-10.pdfApril, 2022
Inflationary pressures, already widespread and prevalent over the last few quarters, were further entrenched by the ongoing war in Ukraine. The severe sanctions imposed on Russia, a significant commodities exporter, compounded difficulties in already stretched global supply chains causing broad price rises. Risk sentiment shifted during the month as market focus moved away from safe-haven demand towards the effects of interest rate hikes and additional hawkish rhetoric from central banks.
The Fund continues to successfully capture the prevailing upward trends in commodity markets, driven by persistent inflationary themes and increasingly geopolitical ones. Nickel
was the top performing position as a short squeeze sparked an extreme price surge in the already strained metal market. Long positions in energies were again a source of strong positive performance. In financials, the Fund’s net short fixed income exposure was well positioned to capture gains from the ongoing monetary policy normalisation conducted by central banks globally. Stock indices also provided gains as the change in risk sentiment was captured by the Fund’s variable positioning in markets, with notable performance from Asian bourses. The Fund’s long US dollar position versus the Japanese yen drove gains in the currencies sector as hawkish signals from the Federal Reserve pushed the world’s reserve currency higher.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-9.pdfFebruary, 2022
The month was marred by a rapid escalation of the crisis in Ukraine, which deteriorated as Russia deployed military within the region. In response to the invasion, world leaders swiftly imposed severe sanctions on Russia. Markets reacted with major stock indices falling deep into correction territory, commodity prices soaring, and volatility in US Treasurymarkets spiking to their highest level in two years. Despite the concerted flight to safety, direction in government bonds was dominated by multi-decade high inflationary prints, elevating yields and making gains for the Fund's net short exposure. In the stock indices sector, the continuing fluctuation in sentiment led to large intraday swings in markets, with the Fund's dynamically changing and often offsetting positions generating muted returns. In currencies, the Fund incurred losses predominantly from its short Australian dollar and long central European currencies positions, such as the Polish zloty, Hungarian forint and Czeck koruna.
Commodity markets rallied over fresh fears of supply shortages. Oil prices rose above $100 a barrel for the first time since 2014 and European natural gas prices surged, rewarding the Fund's net long energy exposure. The Fund's long US natural gas position, however, made losses after a government report forecast milder temperatures, resulting in price declines. Metal and grain markets heavily exported by Russia, such as aluminium and corn, reached multi-year highs, generating profits for the Fund's long positions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-8.pdfJanuary, 2022
Ongoing concerns around global growth, combined with fears of rising rates from tighter monetary policy, drove major equity markets lower. January saw heightened levels of equity volatility with some indices entering correction territory before recovering slightly in the final trading sessions of the month.
Negative sentiment was exacerbated when Federal Reserve Chairman Jerome Powell delivered a more hawkish than expected message during January's FOMC meeting, refusing to rule out a more aggressive string of interest rate rises. The general global monetary policy normalisation led sovereign bond yields higher. The Fund's net short fixed income exposure was able to successfully capture the downward shift in bond prices as investors fled the asset class. Rising short-term US Treasury yields also helped push the US Dollar higher against most peers, whereas the Euro weakened with the prospect of European rate hikes remaining lower than major counterparts. The Fund's net long US Dollar and net short Euro positions both contributed gains. Meanwhile, the unsettled nature of stock markets, particularly US technology shares, led to losses from the Fund's overall net long but decreasing stock indices sector exposure. Nevertheless, small gains were seen from existing short positions in some Asian and US markets.
Energy prices continued their upwards trajectory fuelled by supply problems in key production countries as well as looming geopolitical tensions surrounding Ukraine. The Fund's established long energy exposure generated gains. The other commodity sectors also provided helpful positive performance as prices overall trended higher.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-7.pdfDecember, 2021
The Fund returned 2.05% in December. The month began with continued concerns about the rapid spread of the Omicron coronavirus variant, forcing many countries to introduce tighter lockdown restrictions. Risk sentiment quickly improved however, as data indicated that symptoms appeared milder than initially thought and booster vaccines could provide strong protection. As economic prospects brightened stock markets finished 2021 strongly, attaining double-digit gains for the third year in a row. Elsewhere, government bond yield direction remained driven by central bank rhetoric as sticky inflation led to hawkish signals,sending rates higher.
In financials, stock markets reached record highs further buoyed by positive economic and labour data, with the upward trend creating robust gains for the Fund's net long stock indices exposure. The Fund's bond sector created small gains, with profits from shorts offsetting losses from longs. Whilst in currencies,the resurgence of risk appetite led to losses from the Fund's net short Australian dollar exposure. In commodities, slight profits were made in the energies sector, in particular from long positions in reformulated gasoline and crude oil markets, as prices sharply rose due to an anticipated uptick in demand and falling inventories. The agriculturals sector made a loss, notably from short positions in soybean andsoybean meal, whose prices hit multi-month highs as dry and hot weather in South America stoked supply concerns. Performance by theme: carry, momentum and value were all positive.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-6.pdfNovember, 2021
Before the discovery of a highly mutated coronavirus variant, the market narrative centred on inflation, interest-rate hikes, and the end of central bank stimulus. However, the severity of the situation implied by the rapid imposition of travel bans put the pandemic firmly back in focus and triggered a sharp repricing of risk assets as well as a rally in safe havens.
The US Dollar strengthened to a 16-month high mostly due to differing policy outlooks between the Federal Reserve and the European Central Bank, creatingprofits for the Fund's long US Dollar exposure. In stock indices the Fund's net long exposure detracted from performance as market sentiment rapidlychanged. Government bond yields flattened, with profits from long positions in shorter term maturities just offsetting losses from short positions in medium and longer-term maturities.
In commodities, profits from short positions particularly in heating and gas oil offset losses from long positions, as energy markets in general suffered from reduced demand expectations. The agricultural sector made a slight loss, notably from a long position in cotton where prices fell after demand from China eased.Performance by theme: sentiment and seasonality were positive whilst momentum was negative.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-5.pdfOctober, 2021
The month saw the continuation of global monetary policy normalisation. Sovereign yield curves flattened as investors digested additional inflation and increasing hawkishness. Markets reflected concerns that policy tightening would be earlier than expected against a backdrop of shakier economic growth. Elsewhere, a US government default was narrowly avoided whilst relations between US and China relations deteriorated. Bond yield volatility heightened as central banks looked to taper bond-buying programmes in response to inflationary pressures. Losses were concentrated inlong exposure to short-dated debt whilst short positions in long-dated bonds made gains. Notably, Australian bond yields rose sharply after the Reserve Bank of Australia surprisingly refused to defend its bond-yield target. Meanwhile, long positioning across stock indices was rewarded as a positive start to earningsseason helped stocks advance. Currencies were more mixed and often driven by expectations in interest rate differentials. The US Dollar lost ground against currencies with less accommodative monetary policy.
In energies, OPEC+ agreed not to accelerate production allowing for a rise in oil prices to the benefit of long positioning across the oil complex. Long positioning in metals mostly led to gains as the global energy shortage continued to force metal output cuts from China and Europe. In agriculturals, long exposure to lean hogs detracted as the futures were pressured by weak export activity. Weaker coffee and sugar prices were linked to the weakness in the Brazilian Real.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-1-1.pdfSeptember, 2021
Energy markets dominated headlines: Hurricane Ida forced oil production shutdowns off the Gulf of Mexico in the opening weeks of the month, with oil prices further supported by the oil cartel, OPEC+'s, decision to increase output. Energies continued to be propelled upwards in the second half of September by lowEuropean gas inventories and fears of potential supply shortages during the coming winter months. Elsewhere, stocks fell as central banks, including the Federal Reserve, pointed towards less accommodative policy stances. The potential end to ultra-supportive monetary policy also helped strengthen the US Dollar and caused Treasury yields to rise.
The Fund's net long energies exposure was the main beneficiary from the month's market moves. Gains came from almost every market in the sector, with strong performance coming from natural gas and European energy contracts. Other commodity markets played a supporting role, with small gains from both the agricultural and metal sectors.
In financials, stock indices led to a slight detraction as the Fund’s overall net long exposure suffered from signs of slowing global economic growth and fears the world’s largest indebted property developer could default and set off global financial contagion. Bonds and currencies provided muted performance. Signals of potential interest rate hikes before year end caused the US Dollar to appreciate against major peers leading to a small gain for the Fund’s overall net long exposure.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-4.pdfAugust, 2021
Robust economic data and earning releases helped European and US stocks reach record highs despite the spread of the Delta variant. Asian stock indices suffered however, weighed down by Chinese regulatory clampdown and associated growth deceleration concerns. The Federal Reserve sent their strongest signal yet that their accommodative policies would start to unwind by the end of this year. As other central banks followed suit, investors fled into the safe haven US dollar and away from government bonds as tighter monetary policy became more likely.
As economies continued to gradually reopen there were signs of an improving recovery, sending most stock indices higher and rewarding the Fund's net long exposure. The US dollar strengthened early on due to increasing talk of tapering, political tensions, and disappointing economic data from China, before weakening again towards the end of the month. The Fund's variable net US dollar exposure however, incurred small losses in the currencies sector. The Fund's energy sector was most profitable with notable gains coming from longs in US natural gas which rallied as inventory levels came in far below expectations. Additionally, alternative European energy markets rallied to the benefit of the Fund's longs.
In agricultural, most gains came from long positions in soft commodities such as sugar and coffee, where prices rallied due to adverse weather conditions and lowering of production prospects in key growth regions. Metal prices fell as the US dollar strengthened, causing losses from the Fund's net long exposure.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-3.pdfJune, 2021
The Federal Reserve surprised markets with hawkish rate projections which caused major yield curves to flatten. Investors also temporarily pulled out of the popular reflation trade. Markets subsequently steadied and US stock markets rallied to all-time highs amid President Biden's new infrastructure deal. Towards the end of the month, investors balanced economic growth prospects against rising inflationary pressures and the spread of the highly infectious Delta coronavirus variant.
The Fund found itself on the wrong side of the yield curve flattening as short positions in longer dated bonds detracted from performance. The potential for higher interest rates boosted the dollar index versus major peers which led to losses for the Fund's net short US Dollar position. Fiscal stimulus and central bankassurances outweighed the impact of strong inflation prints to lift major stock markets and the VIX index fell back to pre-pandemic levels. Energies rose and oil prices neared three-year highs following signs of stronger demand optimism and increasing chances of supply deficits caused by reducedinvestment in the sector. In agriculturals, lean hog prices lowered due to falling US wholesale prices for pork products and news of rapidly rising hog numbers in China. Gold and other major metals declined on the back of the robust dollar sentiment and after expectations for a faster pace of policy tightening.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-2.pdfMay, 2021
Risk assets continued their year-long rise. However, mixed economic data releases from the US caused markets to waver throughout the month. Inflation worries continued to prevail amongst investors, yet Federal Reserve officials attempted to calm markets by sending reassuring dovish tones. This accommodative messaging caused the US Dollar to weaken against major peers as it struggled to abate its recent slide. The Fund’s net short US Dollar position captured the ongoing weakness of the world’s reserve currency, mainly against commodity currencies and the British Pound. The US Dollar has now almost entirely erased gains it made at the start of the year. A mid-month wobble, caused by the highest monthly core consumerprice rise in years and associated inflation fears, could not prevent stock markets rising by month-end. Prices were pushed higher by the continued easing of lockdown restrictions and a strong PMI data release out of Europe, aiding the Fund’s net long exposure.
Fixed income positions finished the month slightly down as small gains in long positions in shorter dated bonds were offset by losses in short exposures. Long commodity exposures continue to provide profits. The Fund’s long lean hogs position was the best performing market as the reopening of restaurants across the US pushed pork demand higher. In energies, gas oil and gasoline prices rose on fears of supply shortages due to a cyberattack on a major US fuel pipeline operator, benefitting the Fund’s long exposures. Metal markets joined other commodities with prices rising as the reopening of economies continues to drive up demand. The Fund’s net long metal exposure gained.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191-1.pdfDecember, 2020
Risk assets rallied strongly, bolstered by the deployment of several COVID-19 vaccines which fuelled global growth optimism. After months of negotiations, the US signed into law the second largest relief bill in its history and the UK and EU agreed to a post-Brexit trade agreement. Both agreements helped to boost market sentiment further while a global surge in coronavirus cases and hospitalisations counteracted some of these positive developments.
The main themes generating positive performance this month have been continued US dollar weakness as well as rallying commodities, particularly metals and agriculturals. Unsurprisingly, some of the Fund's best performing currency positions were longs in commodity sensitive regions such as Australia, Chile and South Africa. The Fund's long metals exposure generated gains, with the sector overall appreciating in price as the US dollar weakened. Soybeans reached a six-year high on export optimism and supply concerns as dry weather conditions continued in key growing areas in South America, rewarding the Fund's long exposures. In energies, the Fund's short natural gas position made strong gains as forecasters projected warmer trends and reduced heating demand while short positions in crude oil detracted from performance as prices soared as major oil producers agreed to continue production cuts.
Equity markets also appreciated strongly throughout the month, leading to gains from the Fund's small net long exposures. The Fund navigated the fixed income sector well, making gains, as the near-term optimism surrounding vaccinations, additional stimulus measures and a resurgent pandemic wave combined with the positive sentiment throughout the month led to mixed movements across core government bond yields.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/FS7191.pdfticker: FSF3532AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
Down the bottom, under “Monthly Performance”
fund_features:
To produce consistent absolute returns that are independent of overall movements in traditional stock and bond markets. The fund aims to provide a return greater than the Reserve Bank of Australia cash rate over rolling three-year periods after fees and taxes. Aspect takes a quantitative and systematic approach to investment management. The Fund attempts to capture multiple risk premium factors through exposure to multi-asset derivatives including futures, forwards and swaps. The Fund aims to maximise diversification by spreading risk evenly across the different factors, with no single factor dominating the return profile.
asset_class: Alternatives
asset_category: Systematic Risk Premia
peer_benchmark: Alternatives - Systematic Risk Premia Index
broad_market_index: Credit Suisse AllHedge Fund Index
manager_contact_details: Array
structure: Managed Fund