September, 2023
The Fulcrum Diversified Investment Fund (the ‘Fund’) returned 0.28% (net) for the quarter, with gains from Discretionary Macro and Diversifying Strategies, offsetting declines from Dynamic Asset Allocation (DAA).
Within DAA, losses were led by holdings of equities as global valuations declined. The fixed income holdings also detracted, but by less than equities owing to the underweight bond positioning going into the quarter. These losses were partly offset by positive performance from an overweight commodities stance.
The majority of Discretionary Macro sub-strategies across a variety of asset classes were additive over the quarter. The Fund saw gains coming from long positions at the front end of the sterling interest rates curve amid the more supportive UK policy and inflation backdrop, while short euro positions benefited from US growth relative outperformance and widening interest-rate differentials. A long Japanese yen position was penalised by broad US dollar strength and the Bank of Japan’s decision to maintain its loose policy stance.
The portfolio’s commodities positions also performed well over the quarter. The portfolio’s long oil position saw gains amidst tightening supply from Russia and Saudi Arabia, although there were some losses from the UK Carbon Emissions position as the government overhauled regulations.
Thematic Equities had a positive quarter driven by gains across various themes. A long energy position did well as oil rallied, while being long obesity drug companies has been particularly beneficial following the positive result of drug trials. The portfolio’s long European equities position elsewhere in the portfolio was weighed down by weak manufacturing data impacting the economic outlook for the region.
The investment manager’s focus on embedding Dynamic Convexity in the portfolio was helpful late in the quarter, driven primarily by a hybrid option structured to benefit from a combination of higher oil prices and a lower S&P 500. Outright equity puts also helped as equity markets declined. Volatility saw gains from relative value volatility, dispersion, and dividends over the quarter, offsetting losses in equity option replication and FX correlation.
Elsewhere, the trend-following Diversifying Strategies detracted from returns, with losses from currencies offsetting gains from fixed income and interest-rate swap trades.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Fulcrum-DIF-Quarterly-Report-4.pdfJune, 2023
The Fulcrum Diversified Investment Fund (the ‘Fund’) returned -1.10% (net) for the quarter, with losses from Discretionary Macro offsetting gains from Dynamic Asset Allocation (DAA) and Diversifying Strategies (DS).
Within DAA, gains were led by long exposure to equities, whilst commodities were the main detractor. Fixed income, which the Fund is underweight, had a small negative impact. Returns from DS were led by currencies and commodities positioning within trendfollowing strategies.
Within DM, Fixed Income contributed positively over the quarter, as long positioning in Mexican and Brazilian rates benefited from a substantial decline in forward rate pricing across emerging markets. Performance within currencies was roughly flat over the quarter, with positive performance from emerging market Asian currencies offset by losses on our long Japanese yen holdings as the Bank of Japan maintained its loose policy stance.
Meanwhile, in Equity Macro, option-based exposure to the FTSE 100 detracted after the upside inflation surprise and resultant selloff in UK assets. Equity Thematic also saw losses, as declining energy prices and global industrial weakness led to falls in oil producers and oil refining companies. This weakness in energy prices affected the Commodities strategy, which also detracted from its exposure to precious metals, given the sharp rise in real yields. The Cross Asset strategy saw losses driven by continued defensive positioning from the macro models.
Elsewhere, Dynamic Convexity had a difficult quarter, with low volatility across asset classes resulting in limited payoffs and detractions from option premia. Finally, Volatility strategies had a strong quarter, with gains concentrated in VIX carry, VIX put and equity dispersion positions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Fulcrum-DIF-Quarterly-Report-3.pdfMarch, 2023
The Fulcrum Diversified Investment Fund returned -2.73% (net) for the quarter.
The investment manager’s Macro Allocation and Risk System (MARS) was introduced to the Dynamic Asset Allocation (DAA) strategy. MARS is a proprietary quantitative modelling system that jointly forecasts macroeconomic variables and asset returns and holds long positions in global equities, sovereign fixed income, and commodities. The positive performance of DAA over the quarter came from its positioning in equity and fixed income, whilst commodities detracted.
Volatility posted losses coming from short VRP positions in VIX and bonds in March. Commodities saw mixed performance with losses coming from our long precious metals position which only saw a positive performance pick up in March on the back of an increasing risk-off sentiment, while the position posted mixed returns in the first two month of the year. This was offset by the investment manager’s long Carbon Emissions exposure in the UK and Europe, which posted gains on the back of stable economic activity in the regions.
Equity Thematic detracted from returns, driven by losses in the Long Health Insurers theme amid regulatory uncertainties, while the Short Real Estate and Long US Housing positions recorded gains. The Dynamic Convexity strategy detracted from returns as equities remained relatively strong over the period, despite high levels of volatility and an uncertain macro backdrop. In addition, currency volatility remained very low and inflation risk was largely priced out of the market.
Elsewhere, Cross Asset and Equity Macro were flat over the quarter, whilst Diversifying Strategies detracted amid the sharp reversal in market trends.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Fulcrum-DIF-Quarterly-Report-2.pdfDecember, 2022
The Fulcrum Diversified Investment Fund returned -2.90% (net) for the quarter, with gains from directional strategies offsetting losses from relative value and diversifying strategies. Within relative value, losses were led by equity thematic as risk sentiment rebounded, and currencies performance was hit by an appreciation in European FX. Cross asset and diversifying strategies saw losses as price trends reversed and growth sentiment improved, and dynamic convexity was also down. Commodities positions added to returns as both precious and industrial metals saw strong gains over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Fulcrum-DIF-Quarterly-Report-1.pdfSeptember, 2022
The Fulcrum Diversified Investment Fund returned 3.10% (net) for the quarter, with gains from relative value and diversifying strategies offsetting losses from directional strategies. Within relative value, gains were made from the investment manager’s negative stance on European government bonds, as well as from positioning for a strengthening US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Fulcrum-DIF-Quarterly-Report.pdfJune, 2022
The Fulcrum Diversified Investment Fund returned -1.26% (net) for the quarter, with broad based gains from relative value strategies and diversifying strategies not enough to offset losses from directional strategies. However, the portfolio exhibited very low sensitivity to traditional assets, demonstrating the important role the Fund can play during periods of weakness for traditional portfolios.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FDIF-Quarterly-Report-3.pdfMarch, 2022
The Fulcrum Diversified Investment Fund returned 3.80% (net) for the quarter, with very strong gains from Relative Value Strategies and Diversifying Strategies, whilst Directional strategies detracted marginally. Interestingly, performance was positive each month in the quarter and was broad based across each sub-strategy. Importantly for an absolute return strategy, the returns exhibited a very low sensitivity to traditional assets, demonstrating the important role the Fund can play in an investment portfolio during times such as these.
The investment manager believes that we are in the first innings of the 2020s inflation shock, with the market still complacent about the inflation outlook. Central banks face the difficult task of bringing inflation under control without tipping the economy into recession. Despite the fact that a smooth landing becomes increasingly difficult the more action is delayed, central banks are likely to tolerate a higher level of inflation. Meanwhile, China’s domestic challenges are likely to negatively impact growth and, together with the RussiaUkraine situation, worsen the current global inflationary forces.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FDIF-Quarterly-Report-2.pdfJune, 2021
The Fulcrum Diversified Investments Fund returned 2.68% (net) for the quarter. The key drivers of returns from the Directional Strategies came from the Fund’s exposure to UK equities. Within Relative Value the key contributors were from positioning within currencies, commodities, and the Fund’s volatility strategies. Detractors came from within the Fund’s fixed income and equity macro positioning.
The investment manager’s long Chinese renminbi and US dollar positions were the main performers within currencies. Additionally, the investment manager’s long exposure to oil performed well as did the exposure to carbon emissions. As mentioned above, the investment manager has taken profits on their long US dollar positioning and are now neutral. Within fixed income the Fund’s US steepener underperformed as short-term interest rates increased relative to long-term rates on the back of the Federal Open Market Committee meeting in June, thereby resulting in an overall flatter yield curve. While the investment manager continues to hold a net negative duration bias, the investment manager has reduced their exposures.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FDIF-Quarterly-Report-1.pdfMarch, 2021
The Fulcrum Diversified Investments Fund returned 3.40% (net) for the quarter.
In terms of performance drivers, directional made 1.2%, relative value strategies contributed 2.5% while diversifying strategies added another 0.2% and hedging detracted 0.2%. Within relative value, our commodity and currency strategies contributed the most to performance, with volatility and cross asset strategies also adding to returns. While a strong performer during previous quarters, equity thematic strategies were the main detractor in the first quarter, driven mainly by the investment manager’s technology disruption theme.
Elsewhere in fixed income, gains in UK, European and select emerging market exposures were insufficient to offset losses in the Fund’s US rates positions, which the investment manager reduced as the quarter progressed. The performance of the Fund over the first quarter of 2020 and 2021 highlights the complementarity return stream that the Fund can provide in significant periods of market turbulence. The Fund posted positive returns during both the first quarter of 2020 and the first quarter of 2021, when financial markets experienced one of the largest equity sell-offs and one of the largest bond sell-offs respectively
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FDIF-Quarterly-Report.pdfSeptember, 2020
The Ironbark LHP Diversified Investments Fund (the ‘Fund’) produced a net return of 3.96% for the quarter. As markets continued to recover in the third quarter before retreating in September, the investment manager was pleased to generate positive results in the Fund each month of the quarter. Both the long-standing core allocations in long and short equity, quantitative and macro strategies as well as tactical additions in the relative value and fixed income strategy groups continued to produce positive returns.
Relative value and long and short equity proved the most effective strategies. Relative value strategies continued their strong run of performance since April, with a primary driver being convertible bond exposure that benefited from trades set up during the extreme volatility earlier in the year and new issue trading, while special purpose acquisition company exposure was also additive, particularly in September.
Trading in both instruments has demonstrated the type of positive skew the investment manager seeks in such strategies. Event strategies were also broadly positive, as most merger and catalyst positions progressed according to plan. The investment manager is pleased with the returns they have been able to generate from dislocations in asset classes in relative value strategies, while remaining ready to quickly reallocate capital should the opportunity set becomes less favourable. Long and short equity strategies generated gains across regions.
Within the US, the key driver of positive performance was the investment manager’s low-net, sector-focused program, North Rock, which saw noteworthy gains from information technology and health care exposure as well as capital markets strategies. Gains in Europe were driven by exposure within industrials, but companies in health care and technology also proved beneficial. Fundamental equity strategies in China were the largest contributor from Asia, while exposure to India detracted modestly. The investment manager was particularly pleased with the steady alpha generation from their North Rock program over the quarter and the overall performance of the long and short equity strategy in September when equity markets sold off. In quantitative and macro strategies, most sub-strategies contributed positively to performance, led by discretionary macro and systematic equity strategies. This strategy group continues to be a standout for the year.
Fixed income strategies posted positive performance each month of the quarter, with collateralised loan obligations and corporate mortgage back securities driving gains. While credit conditions normalised to some extent, the investment manager continues to focus on opportunities that are expected to generate attractive returns even in stressed economic conditions. Within credit, emerging markets exposure drove gains as restructurings proved favourable to corporate and sovereign positions. Developed markets long and short credit exposure was also positive. The investment manager continues to examine the opportunity set in liquid credit strategies, preferring nimble and more hedged approaches at present while assessing the potential for an investable distressed cycle to emerge.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Ironbark-DIF-Quarterly-Report-1.pdfticker: HFL0104AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://ironbarkam.com/funds/fulcrum-diversified-investments-fund/
Fund Information -> Performance -> Quarterly Report
asset_class: Alternatives
asset_category: FOHF
peer_benchmark: Alternatives - FOHF Index
broad_market_index: Credit Suisse AllHedge Fund Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Ironbark LHP Diversified Investments aims to achieve long-term absolute returns in all market conditions over a rolling five-year period, with lower volatility than equity markets and in excess of inflation. Fulcrum Asset Management employs a top-down investment process which combines fundamental and behavioural research to identify a handful of core macro themes and satellite ideas to construct a highly diversified and liquid portfolio with low directional exposure. The Fulcrum strategy invests globally, with exposure to equities, fixed income, commodities, alternatives and cash.
- Offers a lowly correlated, diversified return stream with an attractive drawdown profile relative to global equity markets.
- The Fund currently gains its investment exposure predominantly through its investment in the Fulcrum Diversified Absolute Return Fund ARSN 601 830 353 (‘Underlying Fund’) but may also invest in other managed funds managed by the Investment Manager.
- The Underlying Fund will invest globally and aims to hold a highly diversified portfolio, typically consisting of exposure to equities, fixed income, commodities, alternatives and cash.
- The Underlying Fund’s investments may also be made through collective investment schemes (including index funds such as exchange traded funds (‘ETF’s) and actively managed funds managed by the Investment Manager).
- The Fund does not use derivatives however the Underlying Fund may use derivatives for investment purposes and for efficient portfolio management.
- The Underlying Fund will also use hedging strategies to reduce risk over the short term without materially altering its risk profile.