Next Edge AHL Fund: Commentary

FUND COMMENTARY – April 2017

In April, significant events in Europe augmented the now routine news flow surrounding President Trump’s activities. France went to the polls and risk assets surged when centralist Emmanuel Macron came through the first round of the presidential election narrowly ahead of nationalist Marine Le Pen. A snap general election was called in the UK, meaning that the British get to decide whether it will be in May or June. In the US, Donald Trump finally sketched out his long-awaited tax reform, which led with a significant cut to corporation tax but lacked detail around implementation. Gains for the Fund in stocks, agricultural and credit markets over the period were offset by losses in FX and energy trading and the Fund returned a loss for the month.

In FX, losses were split between emerging currencies, where the Fund has been broadly long versus the US dollar and developed where positioning has been more varied. Long South African rand positions were painful following the S&P’s credit rating downgrade at the beginning of April. Longs in the South Korean won suffered on geopolitical tensions in the region, while short positions in the euro against the Australian dollar saw a 4% reversal. Meanwhile, the biggest gains came from shorts in Canadian dollars against the US dollar as the loonie continued to weaken.

Commodities trading was mixed, with losses in energies and metals marginally outweighing gains in agricultural markets. Brent crude oil finished the month roughly where it started, yet was up over 6% intra-month, causing positioning to change sides twice, and losses ensued. Similar volatility hurt trading in aluminum, where a probe into aluminum imports into the US caused fluctuations in the price of the metal. Palladium prices, on the other hand, hit two-year highs on positive demand from the automotive sector. Cocoa prices have fallen sharply since their highs last year, and this theme continued in April, benefiting the Fund’s short position.

Fixed income trading returns were close to zero for the month, but this masked intra-month swings. Long positions, particularly in German bonds, were profitable leading up to the French elections, but experienced losses as prices fell when markets breathed a sigh of relief at the prospect of a Macron victory and there was a move away from safe-haven assets.

Of course, a move away from safe-haven assets in the final week of the month was beneficial for the Fund’s dominant positions in risky assets. France’s CAC40 Index surged around 4% on the 24th of April, following the positive sentiment charge in markets, and benefiting the Fund’s long equity and credit positions. South Africa was the only noticeable detractor, with short positions in the All Share Index being hit by the rally, in spite of the downgrade.

1. Next Edge AHL Fund (the “Fund”) returns are net of all fees and expenses associated with Class A Units charged from December 28, 2009 (trading start date.)
Returns for 2017 are unaudited. Therefore, performance statistics containing 2017 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 April 30th, 2017, are 1-year -11.43%, 3-year 4.27%, 5-year-0.85%, 10-year N/A, and CARR -0.65%
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.