The Sturdza Family Fund launched on 14th December 2018, a month which will be remembered for the brutal drawdowns during the last few days. The combination of investor nervousness and low liquidity pushed the S&P 500 down from 2651 to 2351, an 11% dip, in only 7 trading days. These tremors were felt across markets and asset classes, with a plethora of stress indicators flashing red.
After the S&P uncharacteristicly rebounded 5% on Boxing Day, global markets finally ended the calendar year, returning -5.42% (S&P 500), -3.30% (Stoxx600) and -7.43% (Topix) for the second half of the month.
The Fund, which has been fully invested since inception, ended the year down -2.73%, due to a small negative contribution from an overweighting to the US market, compensated by positive stock selection and market allocation and, above all, a positive absolute contribution from the 30% fund allocation to a mix of US Treasuries. In terms of individual contributions, the 10, 8 and 6 year treasuries led the portfolio, followed by Smith (A.O.) Corp, Dollar Tree and Kose Corp in terms of equities. At the other end of the spectrum, Centene led the way with a 13% drop due to political noise coming from Washington, followed by Constellation Brands (-11%) on softer beer trends and Allergan (-11%) given its higher beta and an underperforming healthcare sector.
The cocktail of political, monetary and macroeconomic uncertainty around the world continues to weigh on global markets and the current positioning of the Fund reflects this reality. The team will continue to adjust the portfolio in the coming months as volatility presents investment opportunities and the expectation that earnings announcements should reveal a clearer picture of the fundamental impacts of the trade and economic slowdowns.