The Crow Point Partners Liquid Alternative Funds lineup posted mixed performance results both during the fourth quarter of 2019 as well as throughout the year.
For the quarter and the full year, the CPP Global Tactical Allocation Strategy posted strong returns on both an absolute as well as risk adjusted basis. Throughout 2019, the fund remained biased towards equity risk and particularly US equity market risk, which proved to be beneficial. During the quarter, however, as trade tensions between the US and China diminished, the fund rotated more into the relatively inexpensive equities in Europe and the Emerging Markets. Of particular focus were equities in sectors and nations which would benefit from reduced trade tensions, such as industrial companies in Germany.
The CPP Alternative Income Strategy additionally posted a good quarter and solid year as its positioning in US credit, particularly high yield was helpful to performance. Long term interest rates fell dramatically in 2019 and long maturity government bonds posted extremely strong returns. The strategy tends to askew high levels of interest rate risk and targets return streams that are typically counter-cyclical to rate driven bond market returns. For the year the strategy performed generally in line with most bond investments but did not meet its overall performance benchmark. Consistent with its mandate, overall portfolio risk remained very low and risk adjusted returns were very strong.
The CPP Multi-Alternatives Strategy underperformed during 2019. A low overall risk profile did not benefit the strategy in a year where asset class returns were very strong across many markets. The strategy has emphasized smaller cap equities which have underperformed large caps. Additionally, the fund struggled with several short holdings and underperformance of other idiosyncratic equity positions.
*net of all fees and expenses
Going forward, we continue to believe that we are in an environment that should be constructive to investment risk takers. Strong economic and profit growth should drive markets to new highs. Additionally, global central banks remain very accommodative, further supporting risk assets. Valuations, however, particularly in US large cap equities need to be monitored. Volatility has been low, which is good, yet a spike is always a possibility in the event of an economic or market dislocation.
2020 should be an interesting year. The overall economic backdrop, particularly in the United States remains optimistic and constructive for investment risk takers. If nothing else, the presidential election will provide a level of entertainment but will also be important to investors as it will set the direction for economic policy going forward. Most importantly, it is highly unlikely that this coming year proves to be as profitable for investors as the past year has been. Volatility will inevitably rear its head and investors will need allocations to flexible, absolute return oriented strategies which can navigate changing, volatile markets.
- 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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