|December 30, 2018||
2018 Q4 was an appropriate conclusion to a year filled with economic uncertainty and geopolitical tensions that translated into the majority of asset classes posting negative returns. Investors witnessed the US equity market erase all its gains in a sizable correction to end 2018. US bonds had a strong December, on the back of that equity correction, and eked out a positive year. Trade-weighted dollar was volatile and directionless for most of the quarter and ended up staying flat for the period. Zero Beta, though impervious to the equity markets correction, was hindered due to losses in our cat bonds and style premia allocations, with the managed futures and opportunistic allocations providing strong quarters and partially mitigating the losses.
|June 30, 2018||
The second quarter of 2018 was marked by elevated political and economic uncertainty and numerous reversals of market trends. Early in the quarter the trade war fears abated and the US dollar began strengthening on the back of rising treasury yields. This precipitated increased volatility in the Emerging Markets as investors feared that increasing borrowing costs could push certain countries towards economic instability. Furthermore, a potential Italian election that could trigger a referendum on EU membership pushed equities, credit and rates markets lower and, while some retracement of the move did occur in June, trade war fears resurfaced and pushed equity markets lower yet again. Zero Beta fixed income allocations provided some positive performance despite rising domestic interest rates, while this quarter’s sizable market gyrations produced significant losses in style and volatility premia strategies as well as the equity market neutral allocation.
|May 29, 2018||
We recently published a Zero Beta specific piece regarding the low correlation of the strategy to conventional markets, how we maintain this low correlation and how it fluctuates. In this piece, we ask two main questions: 1) Des Zero Beta maintain low beta at all times? 2) Deos Zero Beta only invest in positions with zero market exposure?
Click HERE to read the publication.
|January 22, 2018||
Geoploticial tensions, natural disasters and a strong, unconcerned stock market characterized 2017. The Zero Beta strategy finished the year well within our expectations, comfortably outperforming both of our chosen benchmarks with most of our position allocations contributing positively to the strategy. Volatility Timing and Style Premia funds were the top performers within the strategy while several devestating hurricanes, subsequent flooding and California wild fires impacted Catastrophe Bond funds negatively making it the worst performing allocation in the strategy. Overall, the strategy returned +6.1% for the year and maintained its near-zero beta level for the lifetime of the strategy.
Read the entire year-end review here.
|October 20, 2017||
The third quarter of 2017 finally provided investors with some clear market trends, but those came with a couple of weather calamities and geopolitically-generated volatility spikes. The US equity market continued its climb, temporarily interrupted in August by a North Korean missile test and the ensuing rhetoric between President Trump and North Korean leader, Kim Jong-un. This provided for a few significant VIX spikes that failed to sustain.
US treasuries trended towards their lowest yields in 2017 only to reverse in September on the back of an upside surprise in GDP growth as well as the debt ceiling debate resolution and prospective Federal Reserve balance sheet normalization moves. The hurricane season had a major economic impact across the southeastern U.S., Houston, and parts of the Caribbean. The devastation to these areas resulted in negative price movement in Cat Bond funds. Despite its significant exposure to Cat Bond funds, Zero Beta continued to deliver, since all other allocations were positive for the quarter.
For a review of the strategy in the third quarter click here.
|May 1, 2014||
Zero Beta is a separate account strategy designed to produce long-term capital appreciation through the active management of securities that are typically uncorrelated to the general equity & bond market. The strategy consists of positions in Exchange Traded Products (ETPs), mutual funds, and individual securities that collectively aim to produce a positive return stream with zero, or near zero, beta to the equity & bond market. NorthCoast’s experienced management team analyzes 1,000+ funds/investment offerings to construct a comprehensive alternative portfolio seeking the best risk-adjusted return.
Asset Allocation Range:
Tactical allocation shifts based on market conditions: