The Fund delivered a positive return in May.
The main contributors to monthly performance were long positions on technology, financial services and communication services, along with short positions on consumer discretionary.
At an individual stock level, the big winners were: First Solar – given the need for new energy sources to accelerate AI takeup. Nvidia – another set of solid data. Meta – positive sentiment about the beneficiaries of AI. Microsoft – positivity about announcements of AI products. UBS – strong Q1 results.
We further expanded our AI beneficiaries theme to include other industries that will help support the use of artificial intelligence.
We started looking for companies that might contribute to the production of the green energy so desperately needed to power vital data centres. We strengthened an existing position and opened two new ones, which we think will be very promising as the economy picks up over the years ahead.
We added to our quality growth stocks while taking profits on long-term consumer names such as Beiersdorf and Richmont, which had reached our target price.
In the consumer discretionary sector, we kept developing our short-selling theme to take advantage of weakening consumer spending trends.
In technology, we seized on the short squeeze to add a few new short positions in companies whose fundamentals still look shaky.
Our overall gross exposure reached 130%-140% in May, while our net exposure stayed close to its long-term average of +20%.
Europe EUR | 26.8 % |
North America | 13.0 % |
Europe ex-EUR | 12.0 % |
Other countries | 5.4 % |
Equity Basket Derivatives | 1.2 % |
Index Derivatives | -33.2 % |
Total % of alternative | 25.1 % |
Market environment
May was all about risk as the equity market rose after investors bought into April’s weakness. European equities also recorded their first net inflows of the year.
DMs beat EMs, small & mid caps beat large caps, while growth and momentum beat value through the beneficiaries of AI in the technology sector.
The Fed held tight, while investors continued to predict the ECB’s first rate cut.
Movements in bond yields affected equity markets with investors highly alert to macroeconomic data and inflation figures.
After rising at the end of April as inflation picked up, bond yields started to fall again at the beginning of May, partly due to weaker macroeconomic data. Although this development sustained the rally for equities in general, it also led to a degree of rotation with technology, quality and pharmaceuticals leading the way, and tourism, automotive, chemicals and basic resources bringing up the rear.
A number of the most neglected companies also spiked on the return of Roaring Kitty, who chatted about his favourite stock, GameStop, but the joy lasted no more than a week.