Performance by Asset Class Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by asset class as at 28 February 2018
| 2018 |
Rates |
FX |
Commodity |
Credit |
Equity |
Total |
| February 2018 |
0.52 |
-0.15 |
0.00 |
0.01 |
-0.76 |
-0.38 |
| QTD 2018 |
1.77 |
0.18 |
0.03 |
-0.06 |
0.24 |
2.15 |
| YTD 2018 |
1.77 |
0.18 |
0.03 |
-0.06 |
0.24 |
2.15 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Methodology and Definition of Contribution to Performance: Attribution by asset class is produced at the instrument level, with adjustments made based on risk estimates. The above asset classes are categorised as follows: “Rates”: interest rates markets
“FX”: FX forwards and options
“Commodity”: commodity futures and options
“Credit”: corporate and asset-backed indices, bonds and CDS “Equity”: equity markets including indices and other derivatives Performance by Strategy Group Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by strategy group as at 28 February 2018
| 2018 |
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Total |
| February 2018 |
-0.55 |
-0.06 |
0.17 |
0.01 |
-0.00 |
0.00 |
0.06 |
-0.00 |
-0.38 |
| QTD 2018 |
1.89 |
0.01 |
0.03 |
0.03 |
-0.00 |
-0.03 |
0.23 |
-0.00 |
2.15 |
| YTD 2018 |
1.89 |
0.01 |
0.03 |
0.03 |
-0.00 |
-0.03 |
0.23 |
-0.00 |
2.15 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Methodology and Definition of Contribution to Performance: Strategy Group attribution is approximate and has been derived by allocating each trader book in the Fund to a single category. In cases where a trader book has activity in more than one category, the most relevant category has been selected. The above strategies are categorised as follows: “Macro”: multi-asset global markets, mainly directional (for the Fund, the majority of risk in this category is in rates) “Systematic”: rules-based futures trading “Rates”: developed interest rates markets “FX”: global FX forwards and options “Equity”: global equity markets including indices and other derivatives “Credit”: corporate and asset-backed indices, bonds and CDS “EMG”: global emerging markets “Commodity”: liquid commodity futures and options The information in this section has been provided to BHM by BHCM US The labour market showed remarkable strength in February, posting more than 300,000 new jobs, a surge in participation in the labour force, and a cycle-low of 4.1% for the unemployment rate. At the same time, wage gains moderated suggesting that tighter labour markets are not yet overheating. Current-quarter growth appears to have slowed from the brisk pace set at the end of last year. Consumption and business investment expenditures have moderated and, with imports growing at a much faster pace than exports, the external sector is expected to subtract from growth for the second consecutive quarter. Looking forward, solid fundamentals and rising business and consumer sentiment point to stronger growth in the coming quarters. Inflation has firmed since the start of the year. Core Personal Consumption Expenditures (“PCE”) inflation has risen at an annual rate of 2% over the last six months. The 12-month change is stuck at 1.5%, because it is still being held down by last March’s sharp decline in the prices for wireless service plans. When those declines fall out of the 12-month change, core PCE inflation should jump by around 0.3ppts. In Washington, Congress agreed in February to a budget framework over current and next fiscal year that will significantly expand government spending. Coming on the heels of the major cuts in personal and business taxation, analysts upped their forecasts for GDP growth in 2018 and 2019. The new chair of the Federal Reserve, Jerome Powell, testified on the monetary policy outlook for the first time after being sworn in at the beginning of February. He said that he is increasingly confident that inflation is moving up to the Federal Reserve’s 2% target, and that the US and global economies are enjoying continued strength. Many observers took those statements to mean the Federal Reserve would be raising rates at a somewhat faster, but still gradual, pace than previously anticipated. UK GDP in the UK has continued to grow at a moderate pace, supported by a thriving global economy and a low exchange rate. However, political risks stemming from the Brexit negotiations continue to cloud the outlook. GDP grew 0.5% q/q in Q4, up from 0.4% in Q3, bringing the annual rate to 1.5% y/y. The relatively resilient pace of growth in Q4 occurred despite the temporary shut-down of the North Sea ‘Forties pipeline’, which detracted roughly 5bps from GDP. The resumption of the Forties pipeline should boost GDP by 0.1ppts in Q1. However, data so far suggests that construction may weigh negatively on growth given the 9% m/m fall in construction output in January. The composite Purchasing Managers’ Index (“PMI”) has continued to hover around a level of 54.5 (it recovered 1.1pts to 54.5 in February), suggesting that GDP more generally should grow broadly in line with the pace seen over the past year. The labour market has also performed moderately well over the past year, with employment growing 1.3% y/y over 2017. However, employment growth has moderated a little in recent months causing the unemployment rate to rise 0.1ppts to 4.4% in December. At the current rate, the unemployment rate is still well below average historical levels, but the rise marks the first increase since August 2016. In general, surveys on employment suggest that the labour market remains healthy, with employment expected to grow further. Meanwhile, consumer confidence in the UK has continued to sit near long-term average levels, despite the weakness in the housing market and the uncertainty caused by the Brexit negotiations. In general, the housing market has remained relatively subdued since the referendum, with national house prices only growing around 2% y/y, well below the 6-7% pace seen prior to the referendum. Despite only moderate growth, data suggests there is little spare capacity in the economy. Alongside the low levels of unemployment, there has been a pick up in wage growth in most recent data, with average weekly earnings growing around 3% annualised as of December. Although wage growth remains muted compare to pre-crisis average growth rates, the current pace of wage growth should contribute to higher unit labour costs, given the modest rate of productivity growth. In addition, various surveys have alluded to increasing difficulties in the recruitment of labour, suggesting wages may grow more markedly in the future. Headline inflation, which was unchanged at 3% y/y in January (just below the peak of 3.1% in November), is projected to moderate in the medium term as the effects from the earlier exchange rate shock are expected to fade. However, the rise in prices stemming from the earlier depreciation in the exchange rate is proving to be more persistent than originally anticipated; for example core inflation rose 0.2ppts to 2.7% y/y in January, and still sits well above the Bank of England’s (“BoE”) inflation target of 2%. In general, the lack of spare capacity and expected pick up in wages should support domestic inflationary pressures in the medium term. At the BoE’s most recent Monetary Policy Committee (“MPC”) meeting in February, members voted unanimously to keep the Bank Rate unchanged at 0.5%, after having already raised it 25bps in November. However, due to a greater prospect of excess demand, the MPC said that it will need to bring inflation back to the 2% target within a ‘more conventional horizon’, i.e. sooner than was previously indicated. This implies that monetary policy would need to be tightened somewhat earlier, and by a somewhat greater extent, over the forecast period than was anticipated at the time of the November Inflation Report. The Brexit process continues to cloud the outlook for the United Kingdom. In December, the EU council declared that sufficient progress has been made on the three pillars of ‘divorce’ to allow negotiations to move onto discussing a transition deal and the future relationship. However, much of the detail still needs to be agreed, and further clarity is needed on various issues, particularly the Irish border. EMU In line with the consensus forecasts, the Eurozone expanded by 0.6% q/q in Q4 of 2017, but at a pace somewhat slower than the previous two quarters. This moderation seems to be continuing at the beginning of 2018, as indicated by both business surveys and actual data. Indeed, in January industrial production for the whole area contracted by a larger than expected 1.0% m/m. Retail sales only fell by 0.1%, however compounding the 1.1% drop from the end of 2017. At the same time, in February the EMU Composite PMI fell by a large 1.7 points to 57.1, the lowest level since October, although still a robust reading. Moreover, and importantly, the “Expectations” component of the German ifo Business Survey, usually a leading indicator, fell from 108.3 in January to 105.4 in February, more than 5 points below the November peak. Consumer price dynamics have remained fairly subdued, as the headline Harmonised Index of Consumer Prices (“HICP”) inflation declined from 1.3% y/y to 1.1%, undershooting the consensus expectations, while core inflation stood at a mere 1.0% y/y, a touch below the European Central Bank (“ECB”) projections profile. The lack of convincing and sustainable upward pressures on underlying inflation remains the main reason for the persistent ECB dovish attitude and tones. This is despite the removal of the easing bias by the Council around the future possibility to increase the size of the ECB purchases of securities. Moreover, the ECB maintained its language highlighting its concern for upward pressures on the exchange rate of the euro not substantiated by fundamentals, which would mean downside risks for the inflation profile. These risks are shown in the renewed contracting trends of EMU import prices. Japan Governor of the Bank of Japan (“BoJ”), Haruhiko Kuroda, caused some confusion when in parliament he mentioned “exit” and “2019” in the same sentence. In fact, his exit discussion was predicated on first achieving the BoJ’s 2% inflation target. If inflation has not risen to target, yield-curve control will continue. It should also be noted that in subsequent appearances, the chair was more emphatic in insisting that there are no plans to reduce accommodation before the 2% inflation target is met. Smoothing through the high-frequency volatility, the inflation backdrop has improved, but only somewhat. Core inflation is up 0.8% y/y through January, which is higher than half a year ago, but the data hint at flattening out, as energy price inflation has slowed. Certainly, energy cannot be counted on to be the sole force driving inflation to target. Indeed, western core inflation is up only 0.2% y/y, which is a small improvement from early in 2017. The pattern of monthly price increases, of off-an-on upticks of 0.1%, suggests a little further improvement in the twelve-month change. Nonetheless, anything close to 2% inflation excluding food and energy is not in the offing. Consumer inflation expectations have moved up from their bottom around the start of 2017, but are well below the levels seen when optimism in Abenomics was running high. In the last few weeks, the yen-dollar rate appears to have stabilised. But, at around 106 yen to the dollar, the yen is stronger than a few months ago, and certainly is not at a level that can serve as a reflationary impetus. The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited [email protected] +44 (0) 1481 745736 |