361 Managed Futures Strategy Fund &
361 Global Managed Futures Strategy Fund
During the month of February investors were reminded that markets do have the ability to move down—and that they can do so rather violently. By February 8, the S&P 500 Index shed more than 8.5% while the MSCI World Index lost 7.6%. Markets did bounce off their lows, but were still down for the month with the S&P 500 Index and MSCI World Index posting losses of 3.69% and 4.09% respectively. Along with falling markets, we saw volatility increase substantially during the month, including a day in which VIX futures gained more than 100%, nearly wiping out a couple of exchange traded VIX products and a short volatility mutual fund. Additionally, managed futures funds struggled as a group, losing an average of 6.43%. Against that backdrop, the 361 Managed Futures Strategy Fund (AMFZX) lost 1.53% while the 361 Global Managed Futures Strategy Fund (AGFZX) was down 4.66% for February. For AGFZX, losses in Europe accounted for nearly 2.5% of the Fund’s return, while trading Asia and the U.S. cost roughly 1% each.
As we’ve stated previously, increased volatility provides an increase in our Funds’ trading opportunities, but also an increased level of risk. Often, a regime change will lead to a drawdown that then leads to profitable trading, creating a positive (though counter intuitive) relationship between drawdown and total return. After experiencing a greater than 6% drawdown to start February, AMFZX earned back most of its losses while AGFZX earned nearly 2% over the remaining portion of the month. Should volatility continue, we are confident the Funds are well positioned to provide uncorrelated returns through challenging times.