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Saemor’s market neutral fund suffers third monthly slide

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The Saemor Europe Alpha Fund, Saemor Capital’s long-running market neutral hedge fund strategy, shed 1.9 per cent last month – its third successive monthly loss – rounding off a disappointing spell for the Netherlands-based manager which saw the fund down almost 10 per cent for the year.

The Saemor Europe Alpha Fund, Saemor Capital’s long-running market neutral hedge fund strategy, shed 1.9 per cent last month – its third successive monthly loss – rounding off a disappointing spell for the Netherlands-based manager which saw the fund down almost 10 per cent for the year.

The fund – which uses a quantitative factor model aimed at making gains throughout the business cycle, regardless of market environment – generated positive returns in its value and price momentum trades during December.

But while tactical bets in value positions stemmed losses during the fourth quarter, other factor positions suffered negative returns, leaving the fund down 9.9 per cent annually in 2019, Saemor said in its monthly update.

“Our preference for highly profitable qualitatively strong companies, with earnings upgrades and attractive valuations, did not pay off,” Saemor observed. “The results of the UK election lifted domestic plays and banks, but the fund is no longer as geared towards UK domestics as it was a year ago, with earnings revisions having deteriorated for those stocks.”

Looking ahead, the firm is eyeing a recovery scenario in the business cycle, with value names outperforming other factor clusters in Europe and globally. Momentum stocks meanwhile should benefit from falling macro risk, Saemor officials observed in the note.

“Full year results and 2020 outlooks could be beneficial to earnings momentum, which remains one of the key building blocks of our multi-factor approach,” they added. “If and when both value and momentum start to work – our ‘goldilocks’ moment – we would expect a strong turnaround in performance for the fund.

As a result, the strategy is positioned net long in the IT, healthcare, utlilities, media, real estate and energy sectors, while being short materials, consumer discretionary, consumer staples, banks, telecoms and insurance.  Aviva and GlaxoSmithKline are among the fund’s key long bets, along with Tate & Lyle and Bawag. Key shorts include Nokia and Daimler.

Geographically, Dutch, Austrian, Spanish, Swedish and Portuguese stocks are overweight in the portfolio, while Swiss, German, Danish and UK names are under-represented.

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