The Crow Point Partners Liquid Alternative Funds lineup struggled through the fourth quarter of 2018 as the environment for taking investment risk deteriorated sharply and somewhat unexpectedly as we entered October. All the Crow Point funds underperformed over the period, eliminating the outperformance we had previously generated in our strategies. Outside of money markets and cash equivalents, virtually all asset classes posted negative returns in 2018, creating an extremely difficult environment for investors. Throughout 2018, we had maintained an optimistic viewpoint on the global economy and its investment implications. Clearly, that viewpoint was challenged over the past several months, negatively impacting returns.
In spite of the recent market performance, our outlook is not entirely negative. We do recognize certain increased risks in the global economy but do believe that markets have gone too far to the downside. We do not believe a recession is imminent and equity and credit valuations are now much more compelling and should attract investors across multiple risk asset classes. The key variable for us remains our confidence in economic growth.
Two big policy related issues remain and need to be resolved if the markets are to recover from the fourth quarter’s decline. First, is trade policy. The ongoing trade tensions and negotiations between the US and China have increasingly caused anxiety among investors, believing a prolonged trade war will weaken the global economy. Second, is monetary policy as investors have thought that a tightening Federal Reserve and subsequent yield curve flattening are precursors to a recession. We believe, however, that the Fed has overplayed its tightening hand in the face of deteriorating economic conditions and by extension, also believe that concerns over the yield curve are also overdone. Incentives are such that resolution of both policy issues are at hand and could become more apparent to investors into the first quarter.
Overall, assuming continued economic growth, diminished policy risks and compelling valuation we remain optimistic that the environment for investing is attractive and that our active decision-making process and risk framework can provide strong risk adjusted returns for our clients.
- 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 Portfolio Manager at Crow Point Partners
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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