GLOBAL DOWNSIDE PROTECTED (GDP) ALLOCATION

Atlas Global Downside Protected (GDP)

Global Equity Strategy

July 2016 Update

Performance

The global capitalization weighted equity index (FTSE World net of tax) was down 0.62% in June 2016. GDP strategy performance net of fees in June was up 0.53%, 1.15% ahead of the index. From strategy inception on July 9, 2015 through the end of June 2016, the GDP strategy has a loss of 9.18%, net of fees. That is 4.88% below the loss of 4.30% for the global equity index over the same period. The underperformance since inception is primarily the result of the low weight in equities after the January downturn, which limited participation in the sharp rebound of the global equities market which ran from mid-February to April.

The GDP strategy went into June with 74% of the portfolio in the stock market. The choice by voters in the United Kingdom to exit the European Union (“Brexit”) roiled markets toward the end of the month. By June 27, the Monday after the vote, global stocks were off 5.5% for the month, with GDP off half as much at 2.7%. Global stocks then recovered almost all of that loss by June 30.

Most of the GDP positioning choices were beneficial in June. In particular, the strategy was helped by its underweight in Europe – just an 8.5% weight vs a benchmark weight of 20.7%. The other major benefits to performance were from:

  1. –The overweight to Brazil. Brazil has a multitude of problems, just ahead of hosting the summer Olympic games, but nonetheless Brazilian stocks rocketed up 19.5% in June. Most of the gain was from a 12.4% rise in the Brazilian currency, which rallied on improved current account balances.
  2. –The overweight to the US Telecom and Utilities sectors, each of which gained over 7% in June as investors sought “safe haven” assets.

 

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