Alternatives | June Commentary

July 18, 2018



U.S. equities were once again positive, supported by the strong domestic economy. However, international equities were impacted by the looming trade war, with both developed and emerging markets falling. Long/short equity strategies struggled,posting a negative return due to international equity exposure as well as sector positioning. Information technology, a key allocation for long/short equity managers, was negative, with semiconductor names impacted by trade concerns.

Event driven was the top performing strategy for the second consecutive month. The DOJ’s lawsuit aimed at blocking a media transaction was dismissed by the court, allowing for a near 5% rise in the stock price of the target company, and enabling the deal to close. The court’s ruling lifted the uncertainty over mergers, resulting in a bidding war for another media company.

Relative value strategies had modest positive performance for the month, driven by exposure to municipal bonds and high yield. The municipal market continues to be rich, as demand for product outstrips supply.

Macro strategies were mixed. Discretionary managers produced negative results due to emerging markets exposure. Systematic managers were positive as gains from currencies and commodities offset weakness in equities. In particular, long energy and short agricultural commodities positioning was profitable. The price of oil was up more than 10% while some agricultural commodities fell a similar amount.

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