BlueOrange Asset Management February results
Our weighted average return in February was -3.18 %. Since 2015, we have generated a net return of +35.68% with a Sharpe ratio of 1. 24.
In terms of investment strategy performance, our weighted average net returns for February were (a) -0.36% for conservative strategies, (b) -3.25% for balanced strategies, and (c) - 4.37% for aggressive strategies.
February was a difficult month. January’s euphoria gave way to massive selling across all asset classes and served as a reminder that investing in capital markets is not easy.
Selloffs like the one that we witnessed in February trigger fear and doubt in investors. There is no way of being completely certain how much asset prices may fall on a short-term basis or how quickly they will recover. Although we invest client assets based on what we believe will transpire in the long-term, we are always aware of the psychological strain that such sell-offs can induce.
In our January commentary, we wrote:
Unfortunately, since the start of February we have witnessed a brutal sell-off that has reclaimed many of our January gains. We see this sell-off as temporary and do not see reason to panic. Our theses remain intact and we will be looking to add to discounted positions.
Thus far, our reaction has been correct. Although we are not always able to convince all of our clients to weather the storm, we try to take advantage of price weakness to set up future profits for others.
The primary instigator for February’s sell-off was higher inflation, which was signaled by a better than expected average hourly earnings data on February 2nd. If you have been reading our monthly reports, you will know that we have been keenly aware of inflationary forces and have shifted our investment strategy to accommodate the impact of inflation on our portfolios – namely by overweighting commodity producers. Unfortunately, commodities and commodity stocks were caught in the downdraft as well last month, but our thesis remains intact.
In February, Jerome Powell replaced Janet Yellen as Chair of the US Federal Reserve. We do not foresee that his policy will differ significantly from Yellen’s and anticipate that rates will continue to rise at a gradual pace. Unlike his predecessors for the past forty years, Powell has a background in investment banking and is not an economist.
We would be remiss not to mention that Trump’s corporate tax cut has elevated the issue of twin deficits (fiscal and trade) in the US. We find this to be the most appropriate explanation for the recent weakness of the US dollar. However, we believe this rationale to be overdone. Capital flows to where it is treated best, and Trump’s corporate tax cut has been the strongest encouragement to date for enterprise to flourish in America. That being said, Trump’s decision to implement tariffs on imported steel and aluminum sent tremors through financial markets at the start of March and led to the resignation of Gary Cohn from his post as Director of the White House’s National Economic Council. Tariff wars are terrible economic policy, but it has since become clear that the tariffs will not be imposed on all trading partners. It is rumored that Larry Kudlow will replace Cohn. Kudlow is an outspoken supporter of a strong dollar policy.
On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
Important Legal Information
Nothing contained herein constitutes an offer, solicitation or recommendation regarding any investment product or service, or the offer to sell or the solicitation of an offer to buy any financial instrument; nor shall any such services be provided, or financial instruments be offered or sold, in any jurisdiction in which such an offer, solicitation, provision or sale would be unlawful. All content is subject to applicable statutes and regulations. Any potential investor should satisfy oneself that an investment in any product and/or service mentioned in this material is permissible under the rules and regulations of his or her domicile. This material is not directed to any person in any jurisdiction where (by reason of that person's nationality, residence or otherwise) the availability of the material is prohibited.
The information provided is for reference only and investors should determine for themselves whether a particular service or product is suitable and appropriate for their investment needs or should seek such professional advice for their particular situation. Please refer to offering documents for further information concerning specific products.
Certain statements contained herein may be statements of future expectations and other forward-looking statements that are based on current views and assumptions of AS BlueOrange Bank and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. BlueOrange assumes no obligation to update any forward-looking information contained herein.
Past performance is no guarantee of future results. Investing in the financial markets is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Financial instruments may appreciate or depreciate in price owing to conditions, whether real or apparent, in a given market, economy or industry. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Where investments involve currency exposure, changes in rates of exchange may cause the value of the investment to go up or down. Any tax benefits referred to on this material are subject to change and their availability and value will depend on your individual circumstance.
Although BlueOrange has taken reasonable care to ensure that the information contained within this material is accurate, no representation or warranty (including liability towards third parties), expressed or implied, is made as to its accuracy, reliability or completeness by BlueOrange. Opinions and any other contents of the material are provided by BlueOrange for personal use and for tentative reference only. Nothing contained on this material constitutes investment, legal, tax or other advice and is not to be relied on in making an investment or other decision.
© 2018 AS BlueOrange Bank. All rights reserved.