In Q3 2021, the Picton Mahoney Absolute Alpha Fund (“the Fund”) was successful in providing positive returns independent of markets. Our analysis indicated daily portfolio returns contained no statistically significant beta exposures to any of the PMAM asset classes, indicating the Fund is fulfilling the objective of providing market neutral returns.
The largest contributor to positive performance in Q3 was the Market Neutral strategy. The Fund outperformed each of the three core underlying strategies in Q3. The reasons for this outperformance were: ongoing diversification benefits across the three core strategies and positive returns from the additive elements of Factor Risk Premia and our internal tail risk hedging strategy. The internal tail risk strategy provided positive contributions to portfolio returns on many of the equity market sell-off days in September.
Portfolio risk as measured in terms of standard deviation of daily returns continues to be at the lower end of our expected range. We continue to see diversification across the core strategies which suppressed portfolio level volatility. In addition, we have observed a compression of individual strategy volatility.
On the surface, the macro environment is less important to the management of the Fund, however, we do make use of our macro-economic framework to guide both risk management and return seeking behavior at the portfolio level as well as within the underlying strategies.
Q3 was bifurcated with the upward movement in global equity markets in July and August followed by a reversal through September. The confluence of a cautious outlook of active investors, poor seasonality, uncertainty over US Federal Reserve tapering and US political noise related to the looming US debt ceiling and infrastructure packages was too much of a worry for the equity markets. As mentioned above, due to the Market Neutral strategy of the Fund and the systemic risk hedges in place, these events had little impact on performance.
Given the uncertain outlook, diversification will continue to be the most prudent approach and a tool we will utilize in our portfolio management process.
Overall, we are pleased with the behavior of the Fund and the characteristics of sourcing returns from non-directional, uncorrelated strategies. The Fund has an important context vis-à-vis portfolio construction imperatives such as risk diversification, lower correlation and quality of returns.
This material has been published by Picton Mahoney Asset Management (“PMAM”) on October 15, 2021. It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value.
This material may contain “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs of PMAM as of the date they are made. PMAM assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements, as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.This material may contain “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs of PMAM as of the date they are made. PMAM assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements, as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.
There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.
The offering of units of the Picton Mahoney Authentic Hedge® funds are made pursuant to an Offering Memorandum only to those investors in jurisdictions of Canada who meet certain eligibility or minimum purchase requirements. Prospective investors should consult with their investment advisor to determine suitability of investment.The offering of units of the Picton Mahoney Authentic Hedge® funds are made pursuant to an Offering Memorandum only to those investors in jurisdictions of Canada who meet certain eligibility or minimum purchase requirements. Prospective investors should consult with their investment advisor to determine suitability of investment.
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