Early corporate results from the 2nd quarter are off to a strong start with revenues and earnings growing by 5.6 and 10.2 percent, respectively, led by energy and information technology. Nonfarm payrolls increase by a robust 222k during the month while the unemployment rate ticked up to 4.4 percent on a higher labor force participation rate, signaling that more workers are re-entering the labor force. Housing prices continued to trend upwards, but at a more modest pace and continued to remain buoyed by historically low inventory levels. Housing starts and permits have also rebounded to outpace expectations after a month of disappointment. The Fed left rates unchanged at their July meeting.
ALTERNATIVES ADVANTAGE FUND OVERVIEW
● Long/short equity strategies had strong performance with all major sectors in the equity markets producing positive returns. In a reversal of last month, technology exposure was a key contributor as the sector was up +4.27% on strength in the semiconductor and software industries. Health care lagged with hospitals declining as the U.S. Senate voted to begin debate on repealing and replacing the Affordable Care Act.
● The general strength in equity markets along with higher short term interest rates led to modestly positive results for event driven strategies. Deal volume is robust while spreads remain attractive.
● Relative value strategies posted solid performance, benefitting from a decline in longer term interest rates and continued spread tightening. The yield on the U.S. 10 Year Note decreased four basis points, offsetting a portion of the increase seen in June. Investment grade credit spreads were five to seven basis points tighter and sit at multi-year lows.
● Both discretionary macro and systematic macro performed well, with systematic macro leading the way. The strategies took advantage of the continued downward trend in the U.S. dollar against other major currencies. Commodities also contributed, with a sharp rally in oil as well as upward movement in metals.