Alternatives | September Commentary

September 30, 2018





U.S. equities were mixed, with the S&P 500 setting a new high, but retreating late in the month to end with a small positive return. Small cap did not fare as well, posting meaningful losses. Long/short equity produced a slight negative return, being impacted by the overall markets as well as sector performance. Information technology struggled as leading companies testified to Congress about election risk from social media platforms, while the Attorney General questioned if leading tech companies were stifling the free exchange of ideas. 


Event driven strategies had positive performance with merger arbitrage leading the way. Two large health care transactions were close to receiving approval from the Department of Justice, resulting in rising stock prices of the target companies. Continued slight spread tightening as well as rising interest rates also contributed to returns. 


Relative value strategies were modestly positive, as credit spreads tightened but were largely offset by rising interest rates. Equity related strategies contributed little due to the tepid returns of the equity markets. 


Discretionary macro strategies had solid performance due to high yield and emerging markets debt exposure, where credit spreads tightened 20 to 30 basis points. Systematic macro strategies benefited from energy exposure as oil rose nearly 5%. However, short positions in industrial metals and agricultural commodities weighed on returns, as the commodities moved higher. Long exposure to the U.S. dollar also detracted, losing value against other developed currencies. 

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