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 30 April 2018
2018 |
Rates |
FX |
Commodity |
Credit |
Equity |
Total |
April
2018 |
1.19 |
-0.11 |
0.01 |
-0.11 |
0.09 |
1.07 |
Q1
2018 |
0.93 |
-0.20 |
0.01 |
-0.06 |
-0.07 |
0.58 |
QTD
2018 |
1.19 |
-0.11 |
0.01 |
-0.11 |
0.09 |
1.07 |
YTD
2018 |
2.12 |
-0.31 |
0.02 |
-0.17 |
0.02 |
1.66 |
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 30 April 2018
2018 |
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Total |
April
2018 |
0.19 |
0.00 |
0.80 |
0.08 |
-0.00 |
-0.03 |
0.02 |
-0.00 |
1.07 |
Q1
2018 |
0.87 |
0.02 |
-0.46 |
-0.09 |
-0.00 |
-0.03 |
0.28 |
-0.00 |
0.58 |
QTD
2018 |
0.19 |
0.00 |
0.80 |
0.08 |
-0.00 |
-0.03 |
0.02 |
-0.00 |
1.07 |
YTD
2018 |
1.07 |
0.02 |
0.33 |
-0.01 |
-0.00 |
-0.05 |
0.30 |
-0.00 |
1.66 |
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 unemployment rate dropped to 3.9% in April, nearly matching
some of the lows seen in the last 50 years. Payroll gains were
well-maintained, with the average monthly increase over the last
three months approximately 200,000. However, wages gains were
mixed. The Employment Cost Index perked up in the first quarter,
but average hourly earnings were subdued in April. The debate about
how much slack remains in the labour market will continue.
Q1 gross domestic product (“GDP”) rose by a better-than-expected
2.3% (annual rate), a soft patch that is nevertheless above the
trend rate of growth of the economy. Some of the strength reflected
the contributions of inventories and trade that may not be
sustainable over the coming quarter. At the same time, consumption
is unlikely to be as weak as seen in Q1 given the strong
fundamentals in the household sector.
Inflation reached the Federal Reserve’s (“Fed”) target in April,
with headline personal consumption inflation hitting 2%, and core
inflation rising to 1.9%. Notably, core inflation has been running
at an annual rate of 2.3% over the last 6 months and is on track to
hit 2% sometime in the summer.
In Washington, the Fed changed little in its May statement,
leaving it on track to raise rates again when it meets in June.
Elsewhere in Washington, the Trump administration tried to diffuse
trade tensions with Canada and Mexico, and started negotiations
with China. It is hard to guess how the negotiations will
eventually pan out.
UK
Consistent with the moderation in global growth, activity in the
UK has moderated according to recent data. The latest estimates
from the Office for National Statistics (“ONS”) showed that GDP
grew 0.1% q/q in Q1, markedly slower compared to the 0.4% pace seen
in Q4. Some of the weakness appeared to be temporary; for example
construction was particularly weak, detracting 0.2ppts from GDP,
and was likely reflective of the higher than usual snowfall.
However, growth in both the service and manufacturing sectors were
also more modest compared to recent history. The weakness apparent
in March appears to have persisted; business surveys had failed to
rebound materially in April, with the composite Purchasing
Managers’ Index (“PMI”) only rising 0.8pts to 53.2, after having
fallen 2.1pts in the month prior. GfK’s Consumer Confidence Index
also fell in April by 2pts to -9, returning to long term average
levels. Retail sales volumes have also been somewhat muted of late,
barely growing over the past half year. The housing market has
remained relatively soft, as has been the case since the
referendum. House prices continue to grow around 2% y/y, down from
the pace 6-7% seen in 2015 and the first half of 2016. Overall,
data suggests that the pace of growth has moderated compared to the
relatively resilient pace seen in 2017, but the economy is still
expected to grow in line with potential growth over the next
year.
Despite less buoyant activity data, the labour market has
continued to perform well, with employment growing 1.2% y/y as of
March 18, and the unemployment rate is at a multi-decade low of
4.2%. The improvement in the labour market has also been finally
matched with improved wage growth data. Average weekly earnings
(excluding bonuses) are now running at a pace of 2.9% 3m/12m, the
fastest pace since 2015. Surveys related to pay growth, like wage
settlements or recruitment difficulties, also suggest that
underlying wages may continue to improve. Meanwhile, headline
inflation fell 0.2ppts in March to 2.5% y/y, whilst core inflation
fell 0.1ppts to 2.3% y/y. Core inflation is expected to trend lower
as the influence of the post-referendum depreciation in the
exchange rate starts to fade. However, the most recent rise in oil
prices should provide some support for headline inflation, likely
keeping it above the 2% target throughout the next year. At the
Bank of England’s (“BoE”) most recent Monetary Policy Committee
(“MPC”) meeting in May, two members voted to raise the official
bank rate a further 0.25% whilst the 7 person majority voted to
keep rates unchanged at 0.5% (as was the case in the previous
meeting). It appears as though the moderation in recent data had
dissuaded the majority of MPC members from voting for a rate rise
in May. However, the monetary policy statement still concluded that
if the economy were to develop broadly in line with the May
Inflation Report projections, ‘an ongoing tightening of monetary
policy over the forecast period would be appropriate to return
inflation sustainably to its target at a conventional horizon’.
Meanwhile, the Brexit process continues to cloud the outlook for
the United Kingdom. In March, the UK was able to secure a
transition deal, conditional on a final withdrawal treaty, allowing
the UK to stay in the single market and customs union until
December 2020. The agreement also ensured that Northern Ireland
will effectively stay in parts of the single market and customs
union in the absence of other solutions. The next milestone will be
the European Council meeting on June 28th where issues such as the
Irish border, and terms for the future trade, are to be
discussed.
EMU
In Q1 2018 the EMU economy grew by 0.4% q/q (1.6% annualised),
marking a clear slowdown from the 0.7% q/q (2.8% annualised) pace
of the previous four quarters, and way undershooting the 0.7% q/q
prediction made by the European Central Bank (“ECB”) in the
macroeconomic projection presented as recently as March. Although
the moderation was exacerbated slightly by temporary effects,
mostly related to unseasonably cold and snowy conditions in some
regions, it appears mainly related to a downshift in underlying
growth dynamics. Indeed, the slowdown in hard data was matched by
the drop recorded in most relevant business conditions surveys,
from the EMU PMI, to the German ifo Business Climate Index (“IFO”).
Most importantly, business confidence continued to slip into Q2, as
EMU PMI orders, the most relevant cyclical component, fell from
55.0 to 54.5, the lowest level since January 2017, while the
Expectations component of the IFO dropped from 100 to 98.7, the
lowest in two years. Behind this slowdown, which was quite
widespread with the exception of Spain, is the lagged effect of the
appreciation of the euro in 2017, the diminishing impulse provided
by the ECB quantitative easing through the credit channel, and
slower imports from China of European goods. These factors had
contributed to the significant acceleration of activity in 2017, in
an opposite direction. The drop of core inflation to 0.7% y/y in
April, although exaggerated by an Easter effect, supported the
notion that underlying price dynamics are not improving in a way
consistent with the self-sustaining path toward the medium term ECB
objective, which the President of the ECB, Mario Draghi stated as
being the main condition to end net security purchases by the ECB
from September onward.
Japan
The Bank of Japan (“BoJ”) announced no changes to its current
policy after its late April policy meeting. Analysts saw meaning in
a change to the quarterly outlook report. In January, the BoJ
wrote: “the timing of the year-on-year rate of change in the
consumer price index (“CPI”) reaching around 2 percent will likely
be around fiscal 2019”. The April report merely noted that
“comparing the current projections through fiscal 2019 with the
previous ones, the projected rates of increase in the CPI are more
or less unchanged”. The structure of official communications tends
not to be written from new every time, so it is natural to surmise
some meaning in the change. At the same time, the forecast for the
core CPI in fiscal year 2019 was the same in April as it was in
January.
One does run the risk of taking these forecasts too seriously.
The forecast for 2018 was marked down by 0.1pp to 1.3%. Even so, to
reach that rate, over the next 12 months the core rate will have to
move up to average a 1.6% annual rate, double the rate seen through
March of this year. That still seems optimistic given that the
latest western core index unwound the cumulative increases over the
first two months of the year. However, some fundamentals are a
little more constructive. Over the last month or so, the yen has
depreciated about 2% against the dollar, and consumer inflation
expectations rose 0.1pp in April.
Activity has downshifted somewhat, which was evident in some of
the survey data, though not uniformly. In Q1 2018, real GDP
declined 0.6%, at an annual rate, following a moderate 0.6% gain in
Q4. That stands in contrast to the 2.2% average rate seen over the
first three quarters of 2017. The Economy Watchers index was
essentially at a middling level. IHS Markit Purchasing Managers’
surveys have essentially moved sideways for over a year, but in
contrast to the Economy Watchers index, at a more constructive
level.
The Company Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited
bhfa@ntrs.com
+44 (0) 1481 745736
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