Luke's Global Fund achieved a return of -5.3% (in constant currency) return over the month of April, and a -22.6% return to date for FY22 on a constant currency basis Our International Benchmark, the S & P 500, returned -8.8% for the month of April, and the benchmark returned -3.9% to date this financial year.
Our portfolio as at April 31, 2022 is outlined in Figure 1 below:
Figure 1- Portfolio Pie Chart*
*Excluding Short positions in ARKK, EMLC, FM, HYG, XRT
TOP CONTRIBUTORS
Our contribution analysis for the month of April is outlined in Figure 2 below. Our VIXM ETF was the greatest contributor to performance. The VIXM ETF tracks the US VIX Mid-term Futures Index. Typically, 42Macro back tests confirm market volatility increases during Inflationary and deflationary regimes. VIXM is a holding in our Deflationary Macro Regime holdings :
Figure 2 – Contribution Analysis Bar Chart
The contribution analysis, broken down according to Macro styles is outlined in Figure 3 below:
Figure 3 – Macro Regime Contribution Analysis Bar Chart
The Goldilocks/Reflation regime holdings were down significantly, across the board, with $TLT, long duration Treasuries ETF also down, impacted by the deteriorating inflation outlook.
REVIEW OF PORTFOLIO BREAKDOWN
The breakdown of the portfolio is outlined in Figure 4 below. We added to our inflation regime holdings over the month, with energy & food commodity prices continuing to be impacted as the Ukraine War appears to be entering a phase of attrition, with no obvious path to a resolution.
It is becoming increasingly likely that inflation will begin to decelerate by June, under the weight of tightening US monetary and fiscal conditions, noting that US core inflation will most likely remain above the US Federal Reserve's target range despite this deceleration. This means that a US Fed dovish pivot is not likely to occur before asset markets endure a breakdown in valuation. Compounding this, average S & P 500 profit margins are running at unsustainable & historical highs.
Figure 4 – Portfolio Macro Segment Pie Chart *
*Excluding Short positions in ARKK, EMLC, FM, HYG, XRT
TRADING ACTIVITY
In April, we added short positions in ARKK, XRT, HYG, FM, and EMLC. During the month, we subsequently closed our ARKK and 50% of our XRT short position.
We added USO and GOLD to increase our inflation regime exposure, and added PFIX to counter-balance our long duration bond exposure whilst inflation continues to accelerate.
COMPANY NEWS & REPORTS
There was little to report in relation to our holdings.
KEY LEARNINGS THIS MONTH:
In April, the difficult investing environment continues. We take some solace in the fact our portfolio outperformed the benchmark for the month, despite being currently weighed down by our long term goldilocks / reflation exposure.
If you have any opinions on the companies we hold, or would like to know more about our investments, we would love to hear your feedback.
Regards,
Sean