Monthly Report. September ,69

Transcription

1 NAV SEPTEMBER YEAR 3 YEARS 5 YEARS SINCE INCEPTION Global Allocation Fund* 97,76-2,33% -5,31% -9,41% -2,08% 34,18% 157,61% Performance of March 31, 2006 to September 30, Global Allocation Euro Stoxx 50 Index Global Allocation Fund* January 1, 2018 to September 30, ,00 102,00 99,00 96,00 94,69 93,00

2 Informe Mensual THE TOP: when things are so good that they can t get better-yet everyone believes that they will get better-tops of markets are being made. Ray Dalio - Understanding Big Debt Crises September has been another Good month for US equities, reaching new maximums, as well as for many emerging markets, which have recovered some of the summer losses. Consumer confidence is close to beat the historical maximum witnessed in year Conference Board Consumer Confidence Recessions Source: Bloomberg But this was not the case for everyone. This month India has joined the team of the affected by liquidity problems which is palpable in many geographical areas. The list is becoming so big that it is easier to enumerate those that have not been affected so far by the dollar scarcity and the FED s interest rates rises. The FED, as expected, has raised the benchmark rate for the third time this year and a fourth one is expected before year end. In Europe, it seemed that things could be doing better, but Italy just put us in front of reality. Italian economic development since Euro inception is terrible. Sooner rather than later we will see them leaving.

3 Informe Mensual It is hardly understandable how the Dollar is not much stronger against the Euro (where interest rates remain negative), specially now that short term interest rates in the US are close to 3% (and the curve almost completely flat as we mentioned last month). This month yields have gone higher in every point of the USD curve, which negatively affected the performance. Precious metals are not giving us any joy thus far. We have closed the small short position we held on European HY as carry is very negative and we prefer to keep that bullet for later. We are going to extract some paragraphs of Ray Dalio s A Template for Understanding Big Debt Crises (in cursive letter) and try to conclude where we are given his manual (our comments between brackets and in bold letter): While tops are triggered by different events, most often they occur when the central bank starts to tighten, and interest rates rise. In some cases, the tightening is brought about by the bubble itself, because growth and inflation are rising (this is happening in the US) while capacity constraints are beginning to pinch. In other cases, the tightening is externally driven (Argentina, Brazil, Mexico, Turkey, South Africa, India ) Sometimes unanticipated shortfalls in cash flows due to any number of reasons can trigger the debt crises (China, Italy ). Whatever the cause of the debt-service squeeze, it hurts asset prices (e.g., stock prices), which has a negative wealth effect as lenders begin to worry that they might not be able to get their cash back from those they lent it to. Borrowers are squeezed as an increasing share of their new borrowing goes to pay debt service (15% of S&P500 companies do not have enough income to pay the interest on their debt. Debt/EBITDA ratio in the US is, according to Goldman Sachs, 2,25. The prior record was 1,13 in 2008). Typically, these types of credit/debt problems start to emerge about half a year ahead of the peak in the economy, at first in its most vulnerable and frothy pockets. The riskiest debtors start to miss payments, lenders begin to worry, credit spreads start to tick up, and risky lending slows (Investment Grade credit spreads in the US have gone from 60bp to 100bp this year. In Europe, this differential has gone from 25bp to 60bp. In China, junk debt has gone from 5,5% to 11%). Typically, in the early stages of the top, the rise in short rates narrows or eliminates the spread with long rates (i.e., the extra interest rate earned for lending long term rather than short term), lessening the incentive to lend relative to the incentive to hold cash. Early on in the top, some parts of the credit system suffer, but others remain robust, so it isn t clear that the economy is weakening. So, while the central bank is still raising interest rates and tightening credit, the seeds of the recession are being sown. The fastest rate of tightening typically comes about five months prior to the top of the stock market (It looks as if we are in this phase). The economy is then operating at a high rate (US growth at 4%), with demand pressing up against the capacity to produce. Unemployment is normally at cyclical lows (3,8% while jobless claims are at the lows since the 70 s) and inflation rates are rising.

4 Informe Mensual US Continuing Jobless Claims Recessions Source: Bloomberg The increase in short-term interest rates makes holding cash more attractive, and it raises the interest rate used to discount the future cash flows of assets, weakening riskier asset prices and slowing lending (Regarding this point, last month we explained how the valuation differential between value stocks and growth stocks is at its highest level since year 2000, where some growth expectations are provoking unbelievable valuations. Amazon is valued over 1 Trillion USD, almost 30 times its book value and 200 times its earnings.). The more leverage that exists and the higher the prices, the less tightening it takes to prick the bubble and the bigger the bust that follows (Shiller P/E is higher now than in Total world credit versus GDP is at maximums ever, way above the level of 2008).

5 Informe Mensual Hussman Margin - Adjusted CAPE Source: Hussman Strategic Adviors In normal recessions (when monetary policy is still effective), the imbalance between the amount of money and the need for it to service debt can be rectified by cutting interest rates enough to 1) produce a positive wealth effect, 2) stimulate economic activity, and 3) ease debtservice burdens. This can t happen in depressions, because interest rates can t be cut materially because they have either already reached close to 0 percent or, in cases where currency outflows and currency weaknesses are great, the floor on interest rates is higher because of credit or currency risk considerations. We have extensively studied how in all the previous market tops we witness first a new maximum in multiples (P/E ratios), which we think happened in January this year. Between 9 and 12 months later equity market does the final maximum in price, but not in P/E as earnings are at maximums as well. That is why we decided to cut our equity shorts some months ago. And for the same reason it is possible that we reinstate this position sometime in the near term, most probably during the fourth quarter of Let s say that the unavoidable is becoming imminent by the day.

6 Treasuries 11/15/44 Sandstorm Gold ETF Physical Silver ETF Physical Gold Put S&P 500 Strike /2018 Future USA Government bonds Informe Mensual Portfolio 30/09/ % 38,94% 30% 27,41% 20% 10% 7,89% 9,69% 3,52% 0% -10% -20% * -30% -2,14% -40% EQUITIES +3,52% ETF +17,58% OPTIONS FUTURES FI +38,94%

7 Monthly Performance JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC. YEAR ,08% -0,05% 0,35% -0,28% 2,53% -0,62% -2,41% -0,46% -2,33% -5,31% ,27% 2,63% 4,09% -1,26% 0,39% -5,71% -2,21% -1,00% 6,19% -0,56% -4,68% 0,92% -2,08% ,03% 3,56% -5,39% 7,97% -1,12% -17,22% 5,36% 3,42% -1,53% 10,33% 1,77% 2,33% 13,17% ,12% 5,91% 3,72% 4,31% 1,22% 1,53% 4,22% -11,50% -2,72% -4,49% -3,01% 0,74% 3,65% ,03% 9,27% 0,64% 2,58% 1,17% -2,15% -3,33% -0,09% 0,44% -1,20% 5,65% -1,07% 15,26% ,93% -3,41% -1,45% 7,02% 2,95% -8,62% 9,46% 6,21% 7,02% 7,13% -0,11% 0,01% 39,02% ,46% 2,86% -0,73% -12,30% -17,26% 6,36% -9,13% 17,91% 12,83% 5,48% 8,10% 5,73% 21,13% ,90% 4,39% -0,85% 3,74% -4,33% 2,29% -3,83% -18,49% -1,74% 5,70% -17,27% 3,81% -19,27% ,34% 0,84% 4,67% 2,13% -13,65% -4,04% 14,29% 0,43% 2,99% 3,36% -10,95% 7,33% 10,91% ,60% -8,70% 6,01% 14,20% 5,98% 1,11% 10,07% 5,04% 4,76% -0,89% 0,86% 6,25% 43,83% ,79% -0,15% -0,06% 2,74% -0,65% -4,73% -0,51% 0,20% -1,95% 2,99% -2,95% -2,91% -16,96% ,79% -0,79% 1,78% -0,86% 4,53% -4,08% 1,21% 0,26% 0,19% 4,37% -6,99% -4,31% -1,62% ,31% -6,88% 3,01% 1,74% 1,04% 8,11% 6,01% 0,48% 3,49% 16,00% Historical Annual Returns (March ) Monthly Returns Distribution (March ) 55% 45% 35% 25% 15% 5% 20% 18% 16% 14% 12% 10% 8% 6% 4% -5% -15% % 0% -25% Currency Exposure Country Exposure (Equities & Bonds) 70% 67,74% 60% 33,57% 66,43% 50% 40% T-BOND&FUTURE&OPTION ETF USA 30% METAL ETC 20% 17,58% EUR USD 10% 0%

8 Performance Risk Analyst Since Inception Last 12 months 3 years Cumulative Return 157,61% -9,41% -2,08% Average monthly return 0,82% -0,80% 0,05% Maximum monthly return 17,91% 2,53% 10,33% Minimum monthly return -18,49% -4,68% -17,22% Annualized return 7,86% -9,41% -0,70% Sortino Ratio % Positive months 0,45 58,00% 25,00% 44,44% CONTACT DIEGO TORRES diego.torres@quadrigafunds.es QUADRIGA INVESTORS - GLOBAL ALLOCATION MANAGEMENT COMPANY CUSTODIAN CURRENCY LIQUIDITY QUADRIGA ASSET MANAGERS SGIIC, SA SOCIÉTÉ GÉNERALE BANK & TRUST EUR DAILY CLASS A CLASS B CLASS C ISIN CODE LU LU LU BLOOMBERG TICKER AUGLALA LX AUGLALB LX AUGLALC LX MINIMUM INVESTMENT FEES MANAGEMENT 1,50% 1,00% 1,25% PERFORMANCE 9,00% 9,00% 9,00% SUBSCRIPTION NONE NONE NONE REDEMPTION 3% FIRST YEAR 3% FIRST YEAR 3% FIRST YEAR Click here for more information *Performance of Global Allocation FI until 31th of July Performance of Auriga Investors Global Allocation since then DISCLAIMER The information and data contained in this brochure has been prepared for marketing purposes and does not constitute advice. Whilst every effort has been made to provide accurate and complete information, the information contained in this brochure has been prepared in good faith and with due care and no representation or warranty is made as to the accuracy, adequacy or reliability of any statement, estimates, opinions, plans, diagrams o other information contained in this brochure. Auriga reserves the right to change the contents of this brochure at any time. Auriga disclaim all liability and responsibility for any direct or indirect loss, damage, cost or expense which may be suffered through the use of or reliance on anything contained in or omitted from the information contained in this brochure.