In an effort to keep you updated on the 361 Global Long/Short Equity Fund, below are some highlights for the month – mainly to provide context around the Fund’s recent monthly performance.
February 2020 Highlights:
- In February, AGAWX was down 5.55% versus the MSCI World Index which was down 8.45%, slightly outperforming it’s net exposure of 70%.
- Given the sharp drawdown that began on Feb 19th, performance is best evaluated by splitting the month and looking at the days leading up to and then during the drawdown.
- The fund lagged the MSCI World Index for the first part of the month, largely driven by short exposure to high beta stocks which outpaced the market broadly. Heading into the drawdown, the fund lagged the MSCI by 2.8%.
- Once the drawdown began, the fund then got significantly less than its exposure (about 55% of the downside) as high beta stocks sold off much more aggressively than the market in general. See the table below using the S&P 500 High Beta Index as a high beta proxy and the MSCI World Index.
- Down capture was near 50% until the final day of the month which saw the MSCI down by 1.65%, but high beta stocks rallied up 0.62%.
- Prior to last week, our short high beta positioning had been a headwind in recent months. Our research has shown that shorting high beta stocks during market drawdowns can be an effective hedge over time and should the current drawdown and/or market volatility continue, we believe this short high beta positioning will continue to add significant value. Ultimately, the strategy is aiming to limit losses because as you can see from the chart at the bottom, minimizing your downside participation limits what you need on the upside to get back to whole.
February 19th – February 28th Drawdown:
|MSCI World Index||-11.93%|
|S&P 500 High Beta Index||-14.97%|