Politics still has the capacity to surprise the markets, and in May the fallout of the Italian election certainly did that. Volatility was back, just as US President Donald Trump fired the first volley in a trade war with its traditional allies the EU, Canada, and Mexico. The Fund navigated this volatility quite carefully, seeing gains on currencies and energies outweigh losses on fixed income, credit and agricultural markets to end the month up +1.19%. Best trading performance came from currencies, as US dollar strength continued to be the prevailing theme, underlining the market’s risk-averse mood. A long US dollar position against Turkish lira led the way as the lira fell to record lows mid-month. Other short positions in emerging currencies such as Brazil real and Mexican peso also gained, while losses came from within Europe where long euro holdings against both Swiss franc and Swedish krona suffered. Broadly, commodities performance was positive, led by energies where long positions in Brent crude oil, Phelix electricity and WTI crude oil outperformed, while US natural gas proved the only significant detractor. Metals contributed positively, driven largely by a long in nickel, which continued to rally, reaching a new 3 year high. Agricultural trading was more challenging, with losses from wheat and cocoa reversals outweighing the gains from long positions in cotton. Credit performance detracted on the month as long credit positions in Europe suffered amid the Italian market turmoil and increased trade war rhetoric. All the main European iTraxx indices saw wider spreads, causing losses on investment grade, cross-over and senior financials swaps held by the Fund. Despite holding a sizeable long position in the Italian 10yr BTP going into the month, bond performance was ultimately fairly muted over the period. Gains on the rallying German 5 and 10 year bunds offset losses incurred as the Italian crisis created waves of uncertainty in the market. Elsewhere, short positions in Canadian and US treasuries generated modest losses. The worst performance in the equity markets unsurprisingly came from a long in the FTSE Italia All Share index, although this was followed by a long in the Singapore MSCI index. On the positive side, longs in the Russell 2000 and S&P TSX 60 indices performed best.
Source: Man Group Database and Bloomberg
1. Next Edge AHL Fund (the “Fund”) returns are net of all fees and expenses associated with Class A Units and Class F Units charged from December 28th, 2009 (trading start date.) Returns for 2018 are unaudited. Therefore, performance statistics containing 2018 figures shown in this material are subject to final confirmation. The historical annualized rates of return for the Next Edge AHL Fund Class A Units as of are 1-yr 14.32%, 3-yr -2.63%, 5-yr 3.18%, 10-yr N/A, and CARR 1.35%; for Class F Units are 1-yr 15.81%, 3-yr -1.38%, 5-yr 4.59%, 10-yr N/A, and CARR 2.74%. The Fund obtains exposure to the returns of a diversified portfolio of financial instruments across a range of global markets including, without limitation, stocks, bonds, currencies, short-term interest rates, energy, metals and agricultural commodities (the “Underlying Assets”) managed by AHL Partners LLP (the “Investment Manager” using a predominantly trend-following trading program (the “AHL Diversified Programme”) The AHL Diversified Programme is implemented and managed by the Investment Manager.
The AHL Diversified Programme is also accessed by Man AHL Diversified plc. Man AHL Diversified plc is an open-ended investment company organized under the laws of Ireland and listed on the Irish Stock Exchange.While it is intended that the Underlying Assets will be managed with the same investment objectives and strategies used by the Investment Manager in managing the assets of Man AHL Diversified plc, their investments may not be identical and the returns of the Underlying Assets will differ from the returns of Man AHL Diversified plc. Differences in performance will be due to a number of factors including but not limited to fees, taxes, currency hedging, foreign exchange, variations in trading programmes and allocations, cash flows and asset size. The leverage, strategy and investments of Man AHL Diversified plc have varied over time and as a result performance in any future period will vary. The information about the performance of Man AHL Diversified plc is not, and should not be construed to be, an indication about the future performance of the Underlying Assets or the Fund. The charts depicting Performance Attribution, Sector Exposure, Key Market Attribution, Var and Net Exposure Monthly Comparison are derived from Man AHL Diversified plc.
2. World stocks: MSCI World Net Total Return Index
3. Managed Futures: Barclays BTOP50 Index. When 12 months of performance data is unavailable for a calendar year, partial year to date is shown. The indices shown are not benchmarks as they are not representative of the Fund’s investment strategy. They shall be used as a comparison of different strategies only. Please note that if no index is offered for selection, we refrain from showing financial indices as no such index would be representative of the Fund’s investment strategy and a comparison of strategies would be misleading.
4. Sharpe ratio is calculated using the risk-free rate in the appropriate currency over the period analyzed. Where an investment has underperformed the risk-freerate, the Sharpe ratio will be negative. Because the Sharpe ratio is an absolute measure of risk-adjusted return, negative Sharpe ratios are shown as N/A, as they can be misleading. Financial statistics that assume a normal distribution of returns from an investment strategy such as volatility, correlation and Sharpe ratio, may underrepresent the risk of sizeable rapid losses from such investment strategy.
5. In a correlation matrix the values can vary between minus one (perfect negative correlation), through zero (no correlation), to plus one (perfect positive correlation.)
6. The sector attribution percentages above are to be used as indications only. The percentages are estimated and generated from the underlying AHL Diversified Programme system and do not take into account the fees/interest/commission charges on any particular account. Differences may also occur due to slippage variation, portfolio changes, FX movements and post execution adjustments. Therefore, the sum total of these sector indications will not necessarily equate to other reported performance for the month in question.
7. The chart shows long-term risk allocation calculated at the start of the reporting period versus the current sector risk allocations calculated at the end of the period. The current sector allocations give an indicative value of the relative risk of the positions taken within each sector at a given point in time; this number takes no account of correlations across sectors. The long-term risk allocations are designed to reflect the expected long-term risk exposure to each sector relative to the other sectors in the portfolio. The portfolio structure and constituents are regularly reviewed by the investment management team and sector allocations will change accordingly.
8. Exposure values represent the delta notional value of positions expressed as a percentage of fund capital. Where applicable, fixed income exposures are adjusted to a 10-year bond equivalent. Currency exposure within this table only reflects that of the Currency sector traded by AHL and does not include FX hedging or cash management. For credit default swaps, a short position represents buying protection and a long position represents selling protection.
9. The key market attribution gives an indication of which markets have contributed most to the overall performance, both positively and negatively. Therefore, only the key markets are represented.
10. From January 1, 2010 to the present date, the performance of the Next Edge AHL Fund – Class A Units (net of all fees and expenses.)
11. From November 1, 2006 to December 31, 2009 the performance of Man AHL Diversified (Canada) Fund – Class A Units (net of all fees and expenses with dividends reinvested.)
12. This information is on the underlying programme and not the Fund. AHL Diversified Programme represented by the performance of Man AHL Diversified plc from March 26, 1996 to October 31, 2006 (hedged from USD to CAD using the relevant 3 month risk free rate differentials and net of all fees and expenses.) The Investment Manager manages the assets of the AHL Portfolio in accordance with the AHL Diversified Programme. While it is intended that the Underlying Assets will be managed with the same investment objectives in managing the assets of AHL Diversified Programme, their investments may not be identical and the returns of the AHL Portfolio will differ from the returns of AHL Diversified Programme. Differences in performance will be due to a number of factors including but not limited to fees, expenses, taxes, currency hedging, foreign exchange, variations in trading programmes and allocations, variations in notional exposure, investments not being identical, cash flows and asset size. The leverage, strategy and investments of AHL Diversified Programme have varied over time and as a result performance in any future period will vary. AHL Diversified Programme is valued weekly, however, for comparative purposes, statistics have been calculated using the last weekly valuation for each month.
There are inherent limitations in any comparison between a managed portfolio and a passive index. Each index is unmanaged and does not incur management fees, transaction costs or other expenses associated with a private fund. There are risks inherent in hedge fund investing programs.
Note to Investment Professionals: The information in the Monthly Report is being provided to current investors in the Fund and is being provided to their registered dealers for informational purposes only. This is not sales literature and cannot be used as such.
Opinions expressed are those of the author as of the date of their publication, are subject to change and may not reflect the opinion of all members of the Company. Some statements contained in this material concerning goals, strategies, outlook or other non-historical matters may be “forward-looking statements” and are based on current indicators and expectations at the date of their publication. We undertake no obligation to update or revise them. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those implied in the statements.
The Fund is not a trust company and does not carry on business as a trust company and, accordingly, the Fund is not registered under the trust company legislation of any jurisdiction. Units of the Fund are not “deposits” within the meaning of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under provisions of that Act or any other legislation.
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from the registration requirements of those laws. The AHL Portfolio is not directly available to Canadian investors but rather, the Fund provides exposure to the AHL Portfolio. Calculations are based on net asset values after deductions for fees and operating expenses, which are not the same as those to be charged or incurred by the Fund. Therefore, differences in returns of the Fund versus the AHL Portfolio may occur due to a number of factors such as: taxes, fees and expenses, foreign exchange, cash flows, currency hedging, variations in trading programmes and allocations and asset size. The information provided herein is for information purposes only and does not constitute a solicitation, public offering, advice or recommendation to buy or sell interests in the Fund, the Portfolio, shares or any other Next Edge product. Please refer to the Fund’s prospectus for more information on the Fund as any information provided in this Report is qualified in its entirety by the disclosure therein. Past performance is not an indication or guarantee of future performance. Access the latest performance and other information on the Next Edge Capital website: www.NextEdgeCapital.com.
*Source: Man Group Database as of March 31, 2017