Sean: Hello, and welcome to our first Performance Context video of 2020. Today we'll be talking about 2019. I'm joined here by Razvan Remsing, our Director of Investment Solutions. Razvan, to start us off, could you talk us through some of the interesting market things that played up during last year?
Razvan: Yes, certainly. 2019 has been a really interesting year because if you look at it from just beginning to end, take a snapshot. Asset classes, by and large went up. However, it wasn't all plain sailing, it was actually a lot of undercurrent of uncertainty themes running through markets, in particular three main themes that I can pick out that that played out for the year. One of them, of course, has been the ongoing trade tensions between the US and China, how that plays out and impacts markets. We saw recessionary fears, slow-down fears, starting to grip the US and Europe to a certain extent, which prompted central banks to act quite decisively and they've pivoted, started easing - we saw across the board, central bank's cutting rates or becoming accommodative in their stance. At one stage, we saw the entire German yield curve trading at negative yields. And, the third thing that was really the back of investors’ mind was this threat of Brexit and how real the threat of a no-deal Brexit, and what impact it would have on the European economy and the UK economy.
However, by Q3 all that action from central banks really mitigated a lot of those growth worries, so maybe some smoothing of the potential trade war in the US and China, which meant that towards the end of the year risk appetite returned strongly with equity markets once again taking out all-time highs and fixed income becoming a little bit less favoured by markets.
Sean: And how have those conditions impacted the programmes?
Razvan: I'm very pleased to report very strong performance from both the strategies, the Diversified programme of course, the long standing medium-term CTA had a north of 20% year. It was able to navigate a lot of the fixed income markets, both through its directional trend models, but also from it’s the non-trend part of the programmes. The modulations, as we call them, have had one of the best years since inception, and that is actually something that translates very nicely to the Absolute Return programme. That is the lower volatility, more balanced programme which has contributions from momentum, value and carry. A large part of that return during 2019 came from the momentum piece, predominantly from bonds, and to a lesser extent, stock indices, but largely as well from the cross-sectional carry - the carry sleeve of the of the strategy performed very well in 2019 across currencies, as well as some of the other financial asset classes. So on balance what we found very pleasing was that starting the year in 2019, very heavy risk of portfolio, which carried on for the first three quarters, we navigated the rotation from bonds into equities well, and pushed on with a portfolio that has a shape far more dominated by risk assets as we go into the year end, compared to portfolio at the start of the year with a very defensive portfolio.
Sean: Thank you very much for the insight there, and thank you very much for watching we'll see you again next quarter.