Fortem Capital Alternative Growth Fund
UK & EU – For professional and institutional investors only
Switzerland – this is an advertising document for professional and institutional clients as defined by the Swiss Financial Services Act only
Monthly Commentary – 31st August 2021
July was a throwback to last year when stronger growth numbers competed with the spread of a new variant in investors minds. Restrictions continued to be eased across many major economies, but the delta variant tempered investor enthusiasm at various points in the month. Again it was moves in the bond market that were most notable, as US Treasury yields continued to move lower, the 10-year moving below 1.2%. Equities also moved higher. Unsurprisingly, given the fall in yields, it was growth that outperformed as illustrated by the S&P 500’s strong showing. Emerging markets continued their underperformance; the Chinese crackdown on private tutoring companies caused widespread selling of shares such that the Hang Seng was down 10% over the month. Inflation numbers globally continued to print hot, with US inflation hitting a 13-year high in June. For now the bond market continues to accept the ‘transitory’ narrative, but if inflation turns out to be more secular, any taper might cause a severe tantrum.
The Fund was flat over the month.
Unsurprisingly, the Fund’s rates strategies were the biggest detractors given both the moves lower in both yields (higher bond prices) and volatility seen over the course of the month. However, these strategies are structural in nature over the longer term, and should benefit over shorter periods if indeed there is complacency in bond markets and turbulence to come. Elsewhere, most other strategies produced positive returns. Commodity curve benefitted from some of the recent steepening into record backwardation blowing off some steam, while equity quality benefitted from the outperformance of those companies with the farthest distance to default as measured by the Merton Model within the Russell 2000.
June and the early part of July were somewhat of a ‘perfect storm’ as the bond market told a very different story from the underlying data. However, the worst of this seems to have passed and the Fund, having always retained its convexity for the next crisis, should start to return to persistent positive returns as markets normalise in the wake of the biggest market intervention in history.
|Hong Kong 50||-3.0%||-0.1%|
|US Equity Income||n/a||3.0%|
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