August, 2021
Global equity markets rose in August supported by strong quarterly season and continuing optimism over economic recovery. The S&P 500 Index recorded its seventh consecutive month of gains with a 2.9% advance. Stocks were boosted by the Federal Reserve’s dovish policy message, and in particular Jay Powell highlighting the dangers of reducing the Fed’s $120bn bond purchase too quickly.
Bond markets were broadly quiet, and the taper talk did not seem to spook investors too much. The yield on the 10-year US Treasury note recouped some of the mid-month losses, finishing the month higher. Equity Long Short was the Fund’s best performing strategy group, driven by idiosyncratic risk exposure in line with our investment philosophy. Among the strategy’s other risk attributes, style risk and country risk also drove positive returns this month. Gains in style risk were largely due to the strategy’s exposure to European liquidity and Asian Pacific momentum factors, while long exposure to stocks in Ireland was the largest contributor to country risk.
Industry risk was the sole detractor among risk attributes this month. A combination of short positioning in US financial names and long positioning in both US and European retail names made up of the bulk of Industry risk losses this month. Of the 13 developed underlying sector books, the majority were either flat or positive. The largest contributions this month came from Europe Mid-Cap and Asia Equity. Europe Mid-Cap benefitted from a long position in German pharmaceutical company Dermapharm which rose this month on the back of positive sell side analyst sentiment and robust earnings. Lastly Asia Equity made money on Baosteel which is discussed in more detail below. On the flip side, the Europe Consumer, Quant and Long Term Growth strategies detracted from returns this month. Europe Consumer lost money on D-Market Elektronik Hizmetler, discussed in more detail below. Meanwhile the Quant strategy struggled with its short positioning this month. Lastly, Long-Term Growth was negatively impacted by its exposure to luxury stocks this month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Man_Diversified_Alternatives_Monthly_Report_-_Retail_Audience_English_31-08-2021.pdfJuly, 2021
Global equity markets continued to rise in July as strong earnings, progressing vaccination programmes, and further easing of restrictions outweighed growing concerns of the spread of the Delta variant. The Fund again posted a positive return with gains coming from all three strategy groups.
Equity Long-Short led the way and its gains were largely broad-based this month, though positive Style and Idiosyncratic risk were the primary drivers of returns. Style risk returns were mainly attributable to the strategy’s tilt towards European and Asia Pacific momentum stocks. The main drivers of Idiosyncratic returns are discussed in detail below. Elsewhere, the strategy’s ECM activity continues to be strong, and there were only minor losses offsetting them from Industry risk, mainly attributable to long exposure to European retailers. The majority of underlying sector books were either flat or positive. Europe Mid-Cap, Long Term Growth and UK Core were among the top performing strategies on the platform this month. Europe Mid-Cap benefitted from long positions in French listed engineering consulting firm Alten and Dutch manufacturer Aalberts both of which rose on strong Q2 earnings. Long Term Growth made money on long positions in Delivery Hero (discussed in more detail below) and Vitrolife, which produced strong
Q2 results and announced the acquisition of Igenomix. Lastly, UK Core saw a long position in Croda International jump after reporting "record" first half profit and increasing its payout to investors. On the flip side Europe Consumer lost money on a long position in Asos after the UK retailer warned the pandemic continues to create uncertainty
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/175860399.pdfJune, 2021
The Fund reported a small gain in June with small gains across the majority of its strategy groups. Inflation concerns and supply chain disruption issues continued to dominate the markets this month. US inflation again exceeded expectations, with CPI hitting 5% YoY against expectations of 4.7%. Many industries continue to report labour shortages with the US JOLTS Job Openings hitting a another new high. The Fed presented a more hawkish tone after its June FOMC meeting, signalling that discussions on tapering
were commencing imminently and some members shifting their expectations of rate hikes to the back end of 2022 from 2023. Despite this, long end yields declined over themonth. Economic data in Europe remained firm. At their June meeting, the ECB revised up its inflation and growth forecast for the Eurozone to 1.9% and 4.6% respectively (previously 1.5% and 4%).
Within Equity Long-Short, the main European and UK strategies finished the month slightly up but European Mid-Cap delivered a small loss. Looking at some of the underlying books in more detail Long Term Growth, our ECM strategies and Asia Equity were among the top performing strategies across the platform this month. Long Term Growth saw gains predominantly driven by idiosyncratic risk exposure, but also benefited from a tailwind from factor returns. The top contributors to the strategy’s idiosyncraticreturns this month was a long positions in Nike Inc and Puma AG. Nike posted a huge earnings beat towards the end of the month driven by strong US sales, leading to a number of upgrades from the analyst community. Our ECM strategies benefited from longs in Puma AG and Li Ning Co Ltd, the latter rallying after reporting positive results
towards the end of the month. Asia Equity gained from a long position in Flat Glass Group Co Ltd and a short position in an auto related stock. Conversely, market conditions were difficult for Sustainable Energy, Quant, and Europe Consumer. Sustainable Energy struggled with long positions in Iberdrola SA and Neste Oyj.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174806552.pdfMay, 2021
The Fund reported a positive return in May with gains across risk seeking and diversifying strategies. Inflation concerns dominated the markets this month. While this month saw higher than expected inflation readings rattle investors and trigger a sell-off in growth/technology stocks, the release of upbeat economic data led to increased optimism of recovery, driving equity markets higher. Across the Equity Long Short strategies, positive Idiosyncratic risk and successful participation in primary and secondary deals were offset by losses in Industry and Style risk this month. Exposure to energy stocks mainly drove the strategy’s losses in Industry risk, while losses in Style risk were primarily attributable to the strategy’s overall tilt against European value (towards European growth). The main contributors and detractors to these Idiosyncratic returns are discussed in detail below.
It was a difficult month for the 14 developed underlying books, with all but six coming in negative. US Japan and ECM Central were among the top performing strategies on the platform this month. US Japan saw gains predominantly driven by idiosyncratic risk exposure. The top contributor to the strategy’s idiosyncratic returns this month was a long position in IHI Corp which rose dramatically on expectations its operating profit would double over the next year. ECM Central benefitted from its participation in SK IE Technology’s IPO.
Conversely, market conditions were difficult for Europe Financials, Europe Mid-Cap, and Long Term Growth. Europe Financials struggled with a short position in Germany’s Deutsche Wohnen after the stock jumped on the news it was being acquired by rival residential landlord Vonovia. Meanwhile Europe Mid-Cap lost money on a short position in Sonova Holdings jumped on expectations of strong 2021 growth as a result of pent up demand during the pandemic. Finally, long exposure to European growth stocks was responsible for Long Term’s Growth’s losses this month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172751283-1.pdfApril, 2021
The Fund reported a positive return in April with gains across all of its strategy groups. Global equity markets continued to rise during the month as robust first-quarter earnings and the release of supportive economic data outweighed concerns about the pandemic, boosting investor sentiment. Across the Equity Long Short strategies, the stock picking skill of the underlying portfolio managers was the main driver of returns this month with Idiosyncratic risk contributing most. The main contributors and detractors to these idiosyncratic returns are discussed in detail below. Among the strategy’s other risk attributes, both Industry risk and Style contributed positively, while Market and Country risk were flat for the month. Though Style risk’s year to date contribution to returns remains in negative territory, this month saw the strategy’s overall tilt against European value (towards growth) pay off. Of the strategy’s 15 developed underlying strategies, the majority were positive for the month.
UK Core, Risk Arbitrage and Europe Consumer were the top performing strategies on the platform this month. UK Core continues to benefit from companies that the investment team believe are poised to emerge from the pandemic environment in a stronger position. This includes a long position in Diageo, which rose in April following an upgrade from HSBC. Meanwhile, from a deal perspective, Risk Arbitrage benefitted from the US Federal Trade Commission authorizing AstraZeneca's acquisition of Alexion Pharmaceuticals. Finally, Europe Consumer saw long positions in both JS Global and Kering perform well after reporting strong results. On the flip side, it was a difficult month for Medical Devices and Pharmaceuticals. The underlying strategy saw a long position in iRhythm Technologies fall dramatically after the digital healthcare provider cautioned that new US Medicare reimbursement rates would have a significant negative impact on its revenue
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/171647554.pdfMarch, 2021
The Fund reported a small positive return in March with mixed results across its strategy groups. Equity Long-Short struggled with losses in European Equity and Alpha Select, but gains in European Mid-Cap. Risk Seeking booked gains in TargetRisk, Event Driven and Global Convertibles, and AHL Trend in the Diversifying bucket posted the strongest gain. Global equity markets rose in March on growing optimism about the re-opening of the economy. Bond yields continued to rise as did the factor rotation out of growth/momentum stocks into value/cyclical stocks. Investors, spurred by a combination of increased fiscal stimulus and vaccine distribution, sold off expensive technology stocks in favour of stocks in sectors poised to benefit from the return to normal environment.
Within Equity Long-Short, largest detractor from returns this month was Style risk, despite the risk factor representing only a limited amount of the strategy’s overall risk budget. The losses in Style risk were mainly attributable to the fund’s overall tilt against value in Europe, though long exposure to European momentum also played a role. Offsetting gains from idiosyncratic risk, which has been a strongly positive contributor YTD, were weak in March. The majority of the Strategy’s losses this month were mainly concentrated in two underlying books: Long Term Growth and Passive Flow Arbitrage of which were negatively impacted by the rotation from growth/momentum stocks to value/cyclical stocks early in the month. Long Term Growth saw a long position in German remote working software company TeamViewer AG (one of the top positive contributors in 2020) suffer a sharp performance reversal this month after management announced a sponsorship deal that is dilutive to earnings, but which the portfolio management team expects to be supportive of high long-term revenue growth rates. Technology stocks also drove losses in Passive Flow Arbitrage this month. The book lost money on long positions in Blue Moon Holdings and the Hut Group during the tech sell off towards the end of the month. Conversely, Europe Mid-Cap, Risk Arbitrage, and Sustainable Energy found this month’s market conditions more favourable. Europe Mid-Cap’s positive returns this month were overwhelmingly driven by idiosyncratic returns, discussed in more detail below.
Meanwhile Risk Arbitrage benefited from MKS Instruments and II-VI Inc proposed separate deals to acquire Coherent Inc. Finally, Sustainable Energy saw a long position in Vestas Wind Systems perform well following the announcement of President Biden’s green energy plans
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/170304753.pdfDecember, 2020
In comparison to the rest of the year, December was a relatively quiet month, with equities continuing their positive drift as vaccines began rolling out in first the United Kingdom, and then the United States. Beneath this, however, darkness loomed as tensions rose between Australia and China, Brexit negotiations struggled through most of the month, and OPEC lowered its demand outlook further for Q1 2021 as economic uncertainties remained high. A new strain of coronavirus caused a blip in global stocks in the run-up towards Christmas, but this was curbed by reassurance from agreements in the US government on the second stimulus package and an eventual Brexit deal, setting the tone for a more hopeful 2021.
The Fund recorded is strongest monthly return of the year of +1.75% allowing to finish 2020 positively with an overall gain of +2.13%. All the strategies generated profits, with the Equity Long Short bucket leading the way and largely recovering its losses sustained during the momentum factor unwind in November, with returns driven primarily by Idiosyncratic risk. Among the strategy’s other risk attributes, Style risk and Market risk made a modest contribution to returns, while Country risk and Industry risk detracted from returns this month. Though almost all of its eighteen developed underlying books were either positive or modestly negative this month, gains were primarily concentrated in UK Core, Long Term Growth, and Sustainable Energy. UK Core benefitted from a long position in Rio Tinto which rose on the back of increasing iron ore prices and the announcement of a new CEO later in the month. Meanwhile, Long Term Growth saw a long position in Delivery Hero make money following an announcement that the delivery app had received conditional regulatory approval to acquire Woowa Brothers, a South Korean food delivery app owner. Finally, Sustainable Energy made money on a long position in EDP Renovaveis which performed well in as a result of the increased demand for clean energy. On the flip side, Medical Devices and Pharmaceuticals and Risk Arb struggled this month. Medical Devices and Pharmaceuticals saw long position in Arcturus Therapeutics underperform after several analysts cut their ratings citing disappointing progress in developing its Covid-19 vaccine. Risk Arb lost money on a long position in Shimachu Co after Nitori Holdings successfully outbid DCM Holdings Co for the Japanese home improvement retailer.
Within Risk Seeking, Global Convertibles lead the way with AHL TargetRisk and Event Driven also contributing positively as the risk-on sentiment remained strong throughout the month, despite the mid-month blip in global equities. And within the Diversifying group, AHL Trend finished the year strongly as December was a good month for momentum models, as the risk-on sentiment remained strong throughout the month, despite the mid-month blip in global equities. Specifically, performance was strongest in commodities, followed closely by currencies and equity markets. The only asset class in red were bonds, where long positions in German bonds and Japanese long term interest rates suffered due to coronavirus worries in Europe and Japan.
There have been no material changes to the Fund's risk profile and investment strategy since the last monthly report. There have also been no changes to the individuals who play a key role in the investment decisions of the Fund since the last monthly report.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/163249204.pdfticker: MAN0004AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.man.com/products/man-diversified-alternatives
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:
Man Diversified Alternatives aims to generate medium to long term investment returns by accessing a diversified portfolio using a range of alternative investment strategies managed by the Man Group (the “Portfolio”).