LO Funds Alternative Risk Premia v300

Transcription

1 LO Funds Alternative Risk Premia v300 Newsletter For professional investors only Alternatives Systematic 3 March 208 MARKET COMMENTARY March was characterized by global market turmoil with fears of a global trade war taking centre stage. In early March, the US announced tariffs of 25% and 0% on steel and aluminium imports respectively, with certain country exemptions.¹ This was followed by China-focused trade measures by the US in mid-march with a 25% tariff expected to apply on approximately USD 50 billion of imports. On 23 March, China retaliated by announcing tariffs on USD 3 billion of US products. The news negatively affected most stock markets on fears of a global trade dispute. However, to contextualize the above, the proposed tariffs on Chinese goods amounted to about 0.4% of Chinese GDP while those on US goods are less significant for US and global growth. The Fed proceeded to meet expectations by raising rates at its March meeting, taking the policy rate to.75% on the back of encouraging US growth and unemployment figures. The majority of equity indices reported losses as a result of the uncertain environment in March. The S&P 500 and Dow Jones shed their year-to-date gains to end the month at -2.69% and -3.70%, respectively.¹ MSCI World ended the month at -2.8% and the Eurostoxx 50 was also negative for the month at -2.25%.¹ The overall global uncertainty and the drop in the stock markets resulted in a flight to safety in government bonds and a monthly drop in most yields. The yields on the 0-year US Treasury note and the 0-year Bund fell 3 bps and 6 bps, respectively. In the currency markets, the USD remained weakened with the dollar index continuing an overall negative trend that persisted following the Fed s rate hike. The EUR strengthened against the USD and the GBP recorded steady gains as uncertainty around Brexit gradually subsided. In commodities, the Energy sector performed well in March with prices bouncing up mid-month on the back of sustained global demand and stable OPEC output. The Industrial Metals sector was down in March as trade war fears and increased trade taxes on selected goods and products weighed on the sector. Precious Metals remained stable during the month with a marginal increase in gold prices as a result of the drop in the dollar index and flight to safety. PERFORMANCE COMMENTARY LO Funds Alternative Risk Premia v300 recorded the following performance in March: MARCH 208 YTD 208 ITD LO Funds Alternative Risk Premia v % -2.32% +2.6% A major part of the performance was realised through bonds, FX, equities and commodities positioning. At the strategy level, the best contributors were ARP Fixed Income, ARP FX, ARP Commodities, ARP Equities Market Neutral and the ARP Macro Tail Hedge. The ARP Fixed Income strategy realised large gains with its long book (Bund, Gilt, Australian 0y), which largely outperformed its short positioning on US 0y, Canadian 0y and JGBs. The ARP FX strategy benefited mainly from its short positioning on CHF and SEK against USD as well as from its long exposure to GBP against USD. The ARP Commodities strategy contributed strongly to MTD performance as a result of its long Energy, short Agriculture and Metals positioning. The ARP Equities Market Neutral strategy was resilient during the month s equity turmoil with the major contribution coming from the Low Risk factor. The ARP Macro Tail Hedge strategy was rewarding this month by protecting part of the portfolio with its short equities and long volatility positioning. Source: Bloomberg 2 Performance for the LO Funds Alternative Risk Premia v300, N Acc USD, net of fees, including the reinvestment of earnings, capital gains, interest and dividends. Inception date 3 October 206. Past performance is not indicative of future results. Monthly publication of Lombard Odier Investment Managers. Newsletter LO Funds Alternative Risk Premia v300 Data as at 3 March 208 Page /5

2 On the other hand, the ARP Cross-Asset Trend and the ARP Volatility risk premia strategies contributed negatively to the global performance. The ARP Cross-Asset Trend suffered mainly from its net long exposure to US equities, partially compensated by its short positioning on European and Asian equities. Its global positioning evolved during the month to adapt to the new market environment. The strategy reinforced its short equity exposure by extending its short position to the US. Global fixed income positioning switched from short to long while the overall short positioning against the USD was reduced to almost neutral. The ARP Volatility risk premia strategy was slightly negative this month. On our implied/realised book, the strategy suffered on equities while the fixed income portion realized gains and therefore helped to smooth global losses. On our satellite book, the main detractor was the convexity strategy. The strategy suffered from its short put on the S&P 500 and was not compensated by the call options on VIX, which were relatively muted. The Mean Reversion strategy was flat while Curve Arbitrage and Term Structure Arbitrage were slightly down. Given the highly volatile market conditions, the portfolio evolved during the month, putting in place a defensive positioning. At the global portfolio level, equity positioning is short on all regions. Fixed income exposure is overall net long with short positioning on US, Canada and Japan. Global FX positioning against USD is almost neutral with short exposure on SEK, USD, AUD and CAD counterbalanced by long exposure on GBP, EUR and JPY. Commodity positioning remains stable with long exposure to Energy against short exposure to Agriculture and Metals. Overall, our Volatility exposure has been reduced with a decrease in option strategies as well as through our long volatility positioning. Best Regards, The Systematic Alternatives Team Past performance is not a guarantee of future results. Newsletter LO Funds Alternative Risk Premia v300 Data as at 3 March 208 Page 2/5

3 MEASURES SINCE INCEPTION OF THE FUND N-A USD SHARE CLASS Fund AUM (USD million) 55 Strategy AUM (USD million) 6 Return since 3 October % Ann. compounded return.76% Ann. standard deviation 4.04% Percentage of up months 78% Percentage of down months 22% Maximum monthly gain.08% Maximum monthly loss -3.58% Sharpe ratio 0.4 Maximum drawdown -5.9% Recovery period In Recov. CUMULATIVE RETURNS SINCE INCEPTION OF THE FUND 7% LO Funds Alternative Risk Premia v300 (N-A USD) 6% Citi USD 3M +.5% 5% 4% 3% 2% % 0% -% Sep-6 Jan-7 May-7 Aug-7 Dec-7 Mar-8 FUND NET MONTHLY RETURNS SINCE INCEPTION N-A USD SHARE CLASS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD % -3.58% 0.82% -2.32% %.08% 0.23% 0.23% 0.04% 0.66% 0.50% -0.7% 0.4% 0.86% 0.50% -0.05% 4.57% % 0.0% 0.37% 0.45% MONTHLY GROSS PERFORMANCE CONTRIBUTION 2 STRATEGY MTD YTD ARP Fixed Income 0.35% 0.7% ARP Credit 0.04% 0.03% ARP FX 0.3% -0.03% ARP Equities Market Neutral 0.3% -0.62% ARP Commodities 0.25% 0.28% ARP Volatility -0.0% -.47% ARP Cross Asset Trend -0.3% -0.78% ARP Macro Tail Hedge 0.4% 0.3% Other 0.06% 0.3% CAPITAL ALLOCATION STRATEGY BASED 00% ARP Fixed Income 5.2% ARP Credit 9.4% ARP FX 5.4% ARP Equities Market Neutral 20.% ARP Commodities 8.8% ARP Volatility 7.8% ARP Cross Asset Trend 6.8% ARP Macro Tail Hedge 6.4% PORTFOLIO EXPOSURE ASSET CLASS 3 Equity Bonds Credit IG Credit HY FX G0 versus USD Commo Energy Commo Metals Commo Agri -3.66% -5.0% -0.55% -.09% -.45% NMV% 6.06% 4.20% 2.54% RISK METRICS 4 -year ex-ante volatility.87% Margin-equity ratio 3.29% Leverage 2.0 -year equity correlation year fixed income correlation 0.22 Performance for the USD share classes N-Acc, net of fees and expenses; all performance figures reflect the reinvestment of earning, capital gains, interest and dividends. The Fund October 206 figures reflect the performance from 3 to 3 October 206. Annualised standard deviation and Sharpe ratio are calculated using daily figures and the annualised performance, over the appropriate period, of the Citigroup 3M USD Tbill Index as risk-free rate. Max. Drawdown is calculated using daily figures. Source of the figures: Unless otherwise stated, figures are prepared by LOIM. Fund and Strategy AUM as of 3 March 208. Fund AUM covers all share classes. Strategy AUM relates to the Alternative Risk Premia strategy within LOIM which includes the assets under management of managed accounts as well as the LO Funds Alternative Risk Premia which launched on 6 August Performance contribution based on gross returns. Other including cash and other fees. See performance table above for net returns. 3 Net Market Value is the sum of the notional exposures by asset class, using a swap look-through methodology. 4 -year ex-ante Volatility is the historical simulation of the current portfolio volatility over the past year. Leverage is the absolute sum of the notional exposures of the fund. Correlations are calculated using weekly figures over the past year. Equity: MSCI World TR Index, Fixed Income: WGBI All Maturities Index. Past performance is not a guarantee of future results. Holdings/allocations are subject to change. Newsletter LO Funds Alternative Risk Premia v300 Data as at 3 March 208 Page 3/5

4 STRATEGY PHILOSOPHY The LO Funds Alternative Risk Premia v300 aims to deliver absolute returns across investment cycles and target cash % (net of fees) annualized returns with 2-3% volatility and a sharpe ratio of 0.9 over 24 month periods. The fund aims to provide a source of return uncorrelated to traditional asset classes by investing in a mix of long and short strategies across asset classes with balanced exposure to a diversified set of Alternative Risk Premia. Individual strategies selected for the fund are designed to be simple, stable and persistent, consistent with strong economic and financial rationale. The Fund uses a risk-based framework to combine these individual strategies, helping to create a portfolio that is robust across varying market cycles. FUND DETAILS Portfolio managers Laurent Joué, Marc Pellaud Inception date 3 October 206 Pooled Fund domicile Luxembourg UCITS SICAV Investment manager Lombard Odier Asset Management (Europe) Limited Administrator CACEIS Bank Luxembourg Auditor Pricewaterhouse Coopers Legal Advisors Linklaters LLP, Luxembourg INVESTMENT TERMS SHARE CLASS N Share currencies Minimum investment Valuation Redemption frequency Redemption penalties USD, EUR (Hedged), CHF (Hedged), GBP (Hedged), JPY (Hedged) USD million Daily Daily, cut-off T-, 3 PM Luxembourg time Management fee 0.60% Distribution fee Performance fee For detailed information please consult the relevant prospectus of the pooled fund vehicle. INVESTOR RELATIONS Clément Leturgie c.leturgie@lombardodier.com Past performance is not a guarantee of future results. Newsletter LO Funds Alternative Risk Premia v300 Data as at 3 March 208 Page 4/5

5 IMPORTANT INFORMATION For professional investor use only. Not for onward distribution. This document has been prepared by Lombard Odier Funds (Europe) S.A. and is issued by Lombard Odier Asset Management (Europe) Limited, a private limited company incorporated in England and Wales with registered number , having its registered office at Queensberry House, 3 Old Burlington Street, London, United Kingdom, WS 3AB, authorised and regulated by the Financial Conduct Authority (the FCA ) and entered on the FCA register with registration number Lombard Odier Investment Managers ( LOIM ) is a trade name. The fund mentioned in this document (hereinafter the Fund ) is a Luxembourg investment company with variable capital (SICAV). The Fund is authorised and regulated by the Luxembourg Supervisory Authority of the Financial Sector (CSSF) as a UCITS within the meaning of EU Directive 2009/65/ EC, as amended. The management company of the Fund is Lombard Odier Funds (Europe) S.A. (hereinafter the Management Company ), a Luxembourg based public limited company (SA), having its registered office at 29, route d Arlon L-50 Luxembourg, authorized and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended. The Fund is only registered for public offering in certain jurisdictions. This document is not a recommendation to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy the Fund s shares nor shall there be any sale of the Fund s shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. Consequently, the offering of the Fund s shares may be restricted in certain jurisdictions. Prospective investors must inform themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on inconnection with, any contract to purchase or subscription for the Fund s shares. Any such acquisition may only be made on the basis of the official documents of the Fund each in their final form. The articles of association, the prospectus, the Key Investor Information Document, the subscription form and the most recent annual and semi-annual reports are the only official offering documents of the Fund s shares (the Offering Documents ). They are available on http//: com or can be requested free of charge at the registered office of the Fund or of the Management Company, from the distributors of the Fund or from the local representatives as mentioned below. Austria. Supervisory Authority: Finanzmarktaufsicht (FMA). Representative: Erste Bank der oesterreichischen Sparkassen AG, Graben 2, 00 Vienna, Austria Belgium. Supervisory Authority: Autorité des services et marchés financiers (FSMA). Representative: CACEIS Belgium S.A., Avenue du Port 86C, b320, 000 Brussels, Belgium France. Supervisory Authority: Autorité des marchés financiers (AMF). Centralising Agent: CACEIS Bank France S.A., /3, place Valhubert, 7503 Paris, France Germany. Supervisory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Paying Agent: DekaBank Deutsche Girozentrale, Mainzer Landstrasse 6, Frankfurt/Main, Germany Italy. Supervisory Authority: Banca d Italia (BOI) / ConSob. Paying Agents: Société Générale Securities Services S.p.A., Via Benigno Crespi, 9/A - MAC 2, 2059 Milano, Italy; State Street Bank S.p.A., Via Ferrante Aporti 0, 2025 Milano, Italy; Banca Sella Holding S.p.A., Piazza Gaudenzio Sella, 3900 Biella, Italy; Allfunds Bank S.A., filiale italiana, Via Santa Margherita 7, 202 Milano, Italy; BNP Paribas Securities Services, with its registered office in Paris, rue d Antin, 3 and operating via its Milan subsidiary at Via Ansperto 5, 2023 Milano, Italy Liechtenstein. Supervisory Authority: Finanzmarktaufsicht Liechtenstein (FMA). Representative: LGT Bank AG, Herrengasse 2, 9490 Vaduz, Liechtenstein Netherlands. Supervisory Authority: Autoriteit Financiële markten (AFM). Representative: Lombard Odier Asset Management (Europe) Ltd, Netherlands Branch, Herengracht 466, 07 CA Amsterdam, The Netherlands Spain. Supervisory Authority: Comisión Nacional del Mercado de Valores (CNMV). Representative: Allfunds Bank, S.A. Calle Estafeta 6, La Moraleja, Alcobendas 2809, Madrid, Spain Switzerland. Supervisory Authority: FINMA (Swiss Financial Market Supervisory Authority). Representative: Lombard Odier Asset Management (Switzerland) SA, 6, avenue des Morgines, 23 Petit-Lancy, Switzerland. Paying Agent: Bank Lombard Odier & Co Ltd,, rue de la Corraterie, 204 Geneva, Switzerland. UK. Supervisory Authority: Financial Conduct Authority (FCA). Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London WS3AB, United Kingdom, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the FCA. NOTICE TO RESIDENTS OF THE UNITED KINGDOM The Fund is a Recognised Scheme in the United Kingdom under the Financial Services & Markets Act Potential investors in the United Kingdom are advised that none of the protections afforded by the United Kingdom regulatory system will apply to an investment in LO Funds and that compensation will not generally be available under the Financial Services Compensation Scheme. This document does not itself constitute an offer to provide discretionary or non-discretionary investment management or advisory services, otherwise than pursuant to an agreement in compliance with applicable laws, rules and regulations. Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London WS3AB, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the Financial Conduct Authority. An investment in the Fund is not suitable for all investors. Making an investment in a Fund is speculative. There can be no assurance that the Fund s investment objective will be achieved or that there will be a return on capital. Past or estimated performance is not necessarily indicative of future results and no assurance can be made that profits will be achieved or that substantial losses will not be incurred. This document does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before making an investment in the Fund, an investor should read the entire Offering Documents, and in particular the risk factors pertaining to an investment in the Fund, consider carefully the suitability of such investment to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This document contains the opinions of LOIM, as at the date of issue. The information and analysis contained herein are based on sources believed to be reliable. However, LOIM does not guarantee the timeliness, accuracy, or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions as well as the prices indicated may change without notice. The contents of this document areintended for persons who are sophisticated investment professionals and who are either authorised or regulated to operate in the financial markets or persons who have been vetted by LOIM as having the expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has received an assurance that they are capable of making their own investment decisions and understanding the risks involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed as being appropriate recipients of this document. If you are not a person falling within the above categories you are kindly asked to either return this document to LOIM or todestroy it and are expressly warned that you must not rely upon its contents or have regard to any of the matters set out in this document in relation to investment matters and must not transmit this document to any other person. Alternative investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount invested. Alternative investments may themselves invest in instruments that may be highly illiquid and difficult to value. This may also limit your ability to redeem or transfer your investment or delay receipt of redemption proceeds. We refer you to the offering materials for a more complete discussion of the risks relating to an investment in any particular alternative investment. Important information on performance: Past performance is not a guarantee of future results. Where the fund is denominated in a currency other than an investor s base currency, changes in the rate of exchange may have an adverse effect on price and income. All performance figures reflect the reinvestment of interest and dividends and do not take account the commissions and costs incurred on the issue and redemption of shares/units; performance figures are estimated and unaudited. Net performance shows the performance net of fees and expenses for the relevant fund/ share class over the reference period. Source of the figures: Unless otherwise stated, figures are prepared by LOIM. Important information on benchmarks: Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of a fund. The performance of a benchmark shall not be indicative of past or future performance of any fund. It should not be assumed that the relevant fund will invest in any specific securities that comprise any index, nor should it be understood to mean that there is a correlation between such fund s returns and any index returns. Important information on target performance/risk: Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk. Important information on portfolio composition: The portfolio information provided in this document is for illustrative purposes only and does not purport to be recommendation of an investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment in, the referenced securities. They illustrate the investment process undertaken by the manager in respect of a certain type of investment, but may not be representative of the Fund s past or future portfolio of investments as a whole and it should be understood that they will not of themselves be sufficient to give a clear and balanced view of the investment process undertaken by the manager or of the composition of the investment portfolio of the Fund. As the case may be, further information regarding the calculation methodology and the contribution of each holding in the representative account to the overall account s performance can be obtained by the Fund or the Management Company. The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result in a disproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular investor is made. Important Information: You are receiving this newsletter based on your request to be included on the Lombard Odier Asset Management ( LOIM ) distribution list. 208 Lombard Odier Investment Managers all rights reserved. Newsletter LO Funds Alternative Risk Premia v300 Data as at 3 March 208 Page 5/5