The Crow Point Liquid Alternative Funds posted mixed results during the second quarter of this year as the market endured fears of a trade related slowdown. Market returns for 2Q19 were concentrated in higher quality investments, particularly US large cap equities and high-grade fixed income. Small cap equities, a focus in the CPP strategies, have lagged large caps quite significantly over the past year. Additionally, foreign markets have suffered from a trifecta of (1) a strong dollar, (2) trade concerns and (3) weak domestic policies leading to lackluster economic growth and underperforming equity returns. Investment returns concentrated as they were last quarter generally does not favor CPP strategies as we look to manage risk by diversifying return sources in portfolio construction. Over time, however, we believe that investors will benefit from a risk managed, more diversified approach to their alternatives allocations.
Presently our view on fundamental economic drivers is decidedly mixed as many of these variables currently are neither bullish nor bearish, but stable. Yet an environment of economic stability may be beneficial to markets as reasonable economic growth, low inflation and low borrowing rates continue to provide a backdrop for further investment gains.
Small cap equities remain the engine of growth for the US economy and the small cap valuation premium normally seen over large cap no longer exists. Today, small caps trade at a slight forward P/E discount to large cap stocks. Earnings for the S&P 600 peaked about nine months ago and these companies have yet to get back to peak earnings. To the extent that earnings growth re-emerges, investments in smaller capitalization equities should benefit.
The question of trade policy remains but a likely resolution should also be viewed favorably and is likely to catalyze a rotation from larger cap, domestic oriented, interest rate sensitive investments into areas of the marketplace which have been negatively impacted by the trade spat notably international equity markets.
To the extent that a rotation of investment returns does occur, the Crow Point Strategies should be well positioned to provide strong risk adjusted returns to our investors.
- A multi-strategy fund that strives to deliver a low volatility, strong risk adjusted return stream
- Low correlation to traditional asset classes which may help diversify a portfolio
- Utilized as a core alternatives strategy within a broader asset allocation
- Directional, macro driven investment strategy incorporating global equities, debt, commodities, currencies and market hedging tools
- Tactical yet disciplined investment process designed to adjust to an ever-changing market environment
- Utilized as a portfolio completion tool to efficiently enact near term asset allocation decisions
- Fixed Income diversification strategy designed to complement traditional bond portfolios
- Macro overlay mitigates significant portfolio drawdowns
- Utilized to improve and diversify bond return sources away from pure interest rate risk
ABOUT THE AUTHOR
David Cleary, CFA is a partner and Chief Investment Officer at Crow Point Partners
He acts as lead portfolio manager on the Crow Point Portfolio Solutions and the Crow Point Global Tactical Allocation strategies. Previously he spent 23 years at Lazard Asset Management where he held a series of senior portfolio management roles over multi asset and global fixed income strategies. He additionally served as the firm’s global head of fixed income, a $26 billion platform. Prior to Lazard, Mr. Cleary worked at UBS and IBJ Schroder, mostly in fixed income asset management roles. Mr. Cleary began working in the asset management field in 1987 upon his graduation from Cornell University, with a BS in Business Management and Applied Economics. Mr. Cleary is a CFA charterholder.
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