60-standard deviation Movement – ValueWalk Premium
Global Allocation Fund

60-standard deviation Movement

Global Allocation Fund commentary for the month of June 2017.

In June we have had very low net exposure, but this did not help us very much.

Part of the drawdown was due to Banco Popular, where we lost around 1,5%. Last year, as you remember, at some point we had an exposure of close to 8%. Thankfully we stopped out of that position a long time ago. The storm has been violent in the stock (a 60-standard deviation movement).’

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Global Allocation Fund

The revaluation of the EUR did not help us either. Even though the impact on our USD denominated stocks was not too big due to the good behavior of that portfolio, our positions in gold and silver did not work well.

About our position in Eurostoxx 50, we have implemented a hedge almost during the whole month by selling index futures. At the end of the month we closed those shorts with some profit and switched it into the bank sector futures. After the events surrounding Banco Popular and the two Italian Banks this position seemed suitable.

Global Allocation Fund

Nevertheless, those days when the market fell sharply, banks´ stocks were gaining. We closed that position very soon when we found out that US banks did not only pass the stress test, but had a very solid balance sheet position which will allow them to increase dividends and buybacks. Thus, while our long Eurostoxx position cost us 1,5%, our banks hedge meant another 1,5% cost. Thankfully stops are implemented.

At least it seems that bonds have started to fall. During the first halve of the month, bonds were rallying, which made bank´s outperformance a nonsense. Weird as well has been seeing bonds and equities falling in tandem. It seems that the interest rate impact on the valuation of many companies weighted more than anything, except for banks.

Global Allocation Fund

All these factors together ended up in a month where we did not have any significant bad day, but a drop by drop drawdown which was certainly painful. One of the weirdest months that I can remember.

Global Allocation Fund


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