Monthly Performance Update

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.

August 2020 Highlights:

As of 08/31/20MTDQTDYTD
MSCI World Index6.68%11.79%5.34%
Morningstar Long/Short Equity Category3.06%6.18%-0.19%
    • Broadly, market returns were the highest in an August since 1986. During strong months like this, our cash drag (net 70%) is typically the largest detractor on performance and was the case this month.
    • In a change from July (i.e., markets were positive, but high beta stocks trailed), high beta stocks delivered strong performance in August which weighed on returns due to our 30% short position in those names.
    • Headwinds from cash and high beta short positions were offset, however, by strong performance in alpha models. Stocks with the highest expected return, where the Fund has large overweights, outperformed the market broadly by nearly 300 bps in the Fund. As we have discussed in the past, both models (alpha and beta) are expected to drive uncorrelated returns over time. One benefit of incorporating these two independent sources of return in the portfolio is that in times when one struggles (e.g., beta positioning in August), the other can add value, as we saw this month.
    • On both a quarter and year-to-date basis, the Fund has outperformed its beta targets and has provided a much smoother path for investors during a very volatile year.