From a global perspective, February 2022, could be one of the more tumultuous months that we have experienced, so far. With new facts on the ground, Russia reasserting dominance over their former domains, even sable rattling through an increased alert level for their nuclear forces. This brought back memories from the cold war, although markets reactions were somewhat muted.
With an unexpected unity among the European Union and Nato members, there were indeed many surprises as previously fractioned countries managed to respond in a unified manner. Surprisingly, traditionally “neutral” countries joined the sanctions.
As an effect of the progressing invasion of Ukraine, Russia was subject to heavy financial sanctions which are likely to severely hamper the country. Belarus, a Russian ally, although lacking economic significance, is also likely to suffer from the same sanctions. This is likely the environment that will continue to dominate the narrative for some time.
As a quick victory no longer seems to be in the cards for Russia (or Ukraine) and we are likely to continue to see the conflict play out in the next months, if not years. We are yet to see the economic impact of the sanctions or the war itself, which both are likely to be significant. The Russian Rubel collapsed. The unknown unknowns are back in play as a previously lukewarm conflict turned hot.
Thus, this performance update may be of little consequence as we hardly know how these events will unfold in the near term. February turned out to be a mediocre month for equities, that had a modestly negative month (S&P 500 down around 3%). On the back of significant and real supply constraints due to the geopolitical changes, Commodities continued to perform well and printed close to 8% (S&P GSCI).
CTA provided a degree of protection, and it is likely that the more commodities a managed futures trader have, the better the results are. That said, most of the CTA returns were anticipatory and largely materialized before the hostilities erupted. CTA generated 1.5% for the month, taking the year to 3.2%, leading amongst liquid traditional alternative strategies.
Crypto Managers staggered a strong comeback and are likely to have had positive returns due to some strong moves into the month-end. Our daily index returned +8.3% in February, as Crypto may be seen as a way to potentially avoid sanctions (the jury is definitively out on this one). Crypto managers are still down for the year, with a negative -18.6% print for the year.
Event-Driven strategies had a modestly positive month (+10bps) as deal-flows were rather muted. On a yearly basis, the strategy is down. Equity Market Neutral had a slightly negative month (-10bps) but is up for the year. Perhaps the rotation out of growth has matured. Equity Long/Short strategies suffered as the direction of the equity markets was negative (February: -1.2%, YTD: -2.2%).
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