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 31 October 2018
| 2018 |
Rates |
FX |
Commodity |
Credit |
Equity |
Total |
| October 2018 |
0.48 |
0.61 |
-0.03 |
-0.04 |
0.32 |
1.32 |
| Q1 2018 |
0.93 |
-0.20 |
0.01 |
-0.06 |
-0.07 |
0.58 |
| Q2 2018 |
8.54 |
0.46 |
-0.02 |
0.02 |
-0.02 |
8.94 |
| Q3 2018 |
1.70 |
0.89 |
-0.06 |
-0.23 |
-0.35 |
1.95 |
| QTD 2018 |
0.48 |
0.61 |
-0.03 |
-0.04 |
0.32 |
1.32 |
| YTD 2018 |
11.94 |
1.75 |
-0.10 |
-0.30 |
-0.12 |
13.19 |
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 31 October 2018
| 2018 |
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Total |
| October 2018 |
-0.34 |
-0.08 |
1.09 |
0.07 |
-0.00 |
0.02 |
0.56 |
-0.00 |
1.32 |
| Q1 2018 |
0.87 |
0.02 |
-0.46 |
-0.09 |
-0.00 |
-0.03 |
0.28 |
-0.00 |
0.58 |
| Q2 2018 |
4.29 |
0.05 |
2.91 |
0.34 |
-0.00 |
-0.06 |
1.33 |
-0.00 |
8.94 |
| Q3 2018 |
-1.09 |
0.02 |
2.10 |
0.58 |
-0.00 |
0.00 |
0.35 |
-0.00 |
1.95 |
| QTD 2018 |
-0.34 |
-0.08 |
1.09 |
0.07 |
-0.00 |
0.02 |
0.56 |
-0.00 |
1.32 |
| YTD 2018 |
3.71 |
0.00 |
5.73 |
0.90 |
-0.01 |
-0.07 |
2.54 |
-0.00 |
13.19 |
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 Growth slowed in the current quarter after setting a torrid pace through the middle of the year. The weaker data seen in housing, manufacturing, and investment stoked fears of recession among some investors. However, those worries probably owed more to equities giving up their gains for the year in October rather than any serious deterioration in the fundamentals. We look for above-trend growth for the rest of the year. Wage inflation picked up in October and price inflation remained near the Federal Reserve’s (“Fed”) 2% target. The labor market continued to break modern records with the unemployment rate at 3.7%. The Fed is widely expected to raise rates for a fourth time this year in December, but may adopt a more data-dependent stance going into 2019. UK The UK government and EU are finally close to agreement around the Brexit withdrawal agreement and declaration of future relations; however there still seems to be no parliamentary majority for either ‘no-deal’ or for the deal currently on the table. On the economic front, although economic data has been favourable in recent months, uncertainty related to Brexit (and in particular risks of the UK facing a ‘hard exit’ without a transition period) is likely to intensify and weigh negatively on economic data. GDP in the third quarter of this year grew by 0.6% q/q, up from 0.4% in Q2. However, the pick-up in activity likely reflects temporary factors like increased consumption (partially due to the World Cup and Royal wedding), as well as a reversal in construction after being weighed down by poor weather earlier in the year. The PMIs (a set of surveys reflecting business sentiment) have fallen -2.1pts over the two months to October, reaching a level of 52.1, the lowest level since the referendum. Current levels of the PMI point to GDP growing closer to 0.2% q/q. Furthermore, external demand appears to be weakening as implied by weaker growth surveys from both Europe and China. Otherwise, the labour market in the UK continues to perform well and a further improvement should be seen if Brexit is resolved. In the latest vintage of data, although the unemployment rate ticked up 0.1ppts to 4.1% in September, it remains near multi-decade lows of 4.0%. Meanwhile, wage growth has continued to trend gradually upwards reaching 3.2% y/y in September. Looking at the nominal side of the economy, consumer inflation is currently running at 2.4% y/y as of October, unchanged from the previous month. The outlook for inflation will also depend on the type of Brexit (and more specifically the reaction of the currency as well as the possibility of new trade tariffs). The outlook for inflation should in turn determine the Bank of England’s conduct of monetary policy. If a deal emerges and a transition period is ensured, the market expects that the Bank will resume its path of policy normalisation and continue gradually increasing the policy rate. If no-deal is guaranteed, the Bank’s conduct of monetary policy will depend jointly on the evolution of demand, supply and the exchange rate. EMU In Q3, EMU GDP expanded by just 0.2% q/q, significantly disappointing both the Consensus and European Central Bank (“ECB”) forecast, as German GDP contracted by 0.2% q/q. Although the contraction in Germany was exacerbated by the impact of new car emission regulations on production, the slowdown is not only due to cars, and a weakening trend is clear. Although some statistical rebound of the GDP q/q rate in Germany is likely in Q4, the annual growth rate may stay around the same level as in Q3, which would indicate no improving trend. Indeed, the EMU Composite Purchasing Managers' Index (“PMI”) also dropped significantly in October, dragged down by Germany, reinforcing these Q3 GDP trends and signalling a weak start to Q4. Details of the October PMI report were also softer than the headline, with forward-looking components driving the decline and signalling further weakening in the pipeline. On the consumer price front, EMU headline inflation edged up to 2.20% y/y in October from 2.07% y/y in September, while EMU Core inflation also rose to 1.07% y/y from 0.91% y/y in September. However, the Core rate remains below its high for this year and is set to average just 1.0% for 2018, just as it did in 2017, upsetting the ECB forecast of 1.1%. Furthermore, the slowdown in activity confirmed by the very soft EMU Q3 GDP does not bode well for the chances of an end to the inertia in Core going forward. Indeed, the third EMU GDP release in a row undershooting significantly the ECB forecast seems to have undermined the ECB’s conviction in its macro outlook. The latest speech by ECB President Draghi contains some significant cracks in the ECB’s apparent wall of confidence on the self-sustained convergence of inflation towards target. Still, in the absence of further distractions between now and the 13 December 2018 ECB policy meeting, the central bank should still be more likely to stay on course with ending net purchases in December. However, Draghi’s speech suggests that the risk that the ECB will have to extend quantitative easing is non-nil. Japan Chairman Kuroda dropped another hint that the Bank of Japan may be wishing to moderate its very accommodative policy, saying that the need for “a large-scale policy to overcome deflation” was no longer needed. Core inflation, whether national or just in Tokyo, has hit 1% on a 12-month basis, which is halfway between deflation and the 2% target. That relatively good news, however, is due to energy costs, as non-fresh food inflation is also running around 1% and western core prices are running well below that rate. The problem with energy prices is that they can also decline. Indeed, Brent crude oil prices in yen terms have dropped sharply; as of mid-November they had reduced back to where they were seven months earlier. It remains to be seen whether the consumer price index will align with policymakers’ hopes of being able to declare deflation is dead. Activity has recently slowed somewhat, consistent with the general read of world GDP excluding the United States. Real GDP declined a little over 1% at an annual rate in the third quarter. Household consumption and government investment fell. Net exports were a modest drag on growth, with decreases in both exports and imports. Smoothing through the quarterly wiggles, private domestic demand appears to be still growing at a moderate rate, but the contributions of both public spending and net exports have turned negative. Surveys have generally moved sideways at decent, though not robust, levels. The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited [email protected] +44 (0) 1481 745736 |