Brandywine Asset Management April 2016 report titled, “Market Movers – Failure To Reach Oil Deal Leads To Rally In Oil Prices.”
Market Movers – Failure to Reach Oil Deal Leads to Collapse Rally in Oil Prices
The headlines should have been easy to write – and in fact many were written, albeit incorrectly. After the hyped-up meeting of oil producers in Doha broke up without a production cap, oil prices immediately fell by more than 6%. Headlines were quick to proclaim this was because the “Doha talks collapsed.” But within a day oil prices rose and continued to rebound to close out the month up more than 15%.
This seemingly perverse reaction to what was perceived as a bearish event is why Brandywine employs a highly systematic, Return Driver based approach to investing. Over time this approach is designed to exploit short-term emotional reactions, such as the Doha failure, to profit from longer-term fundamental opportunities.
Brandywine’s Symphony Program Posts Record Performance
Strong gains from fundamentally-based positions in the energy, metals and agricultural commodities markets, supplemented by profits in currencies and stock index trading, combined to produce a record monthly performance of +10.47% for the Brandywine Symphony investment program.
While all Brandywine programs are profitable on the year, it is Brandywine’s Symphony program that really stands out. To some extent this was to be expected. After a 16 month drawdown, many of Brandywine’s fundamental value strategies had accumu-lated long positions in commodity markets at multi-year or decade lows. As our investors are well-aware, this process will lead to losses if they are not being offset by profits from other strategies in Brandywine’s portfolio. That is what occurred from September 2014 through December 2015. There is however, a strong reversion-to-mean tendency for some of these strategies that can make “buying the drawdown” a very compelling opportunity. We discussed this numerous times over the past year and in December stressed that “the most difficult periods are often followed by conditions that are more highly favorable…” We followed this up last month by saying that “those strategies that have been the largest contributors to our drawdown also have the most potential to lead Brandywine’s Symphony program in any performance recovery.” That is what occurred in April.
It continues to be our belief that our performance prior to the drawdown is more representative of how we expect to perform going forward than was our performance last year. Our 2016 performance is an indication of what a return to that prior positive performance could look like. Also, as we stated last month, the solid performance of Brandywine’s investment programs this year continues to point out why they serve as an excellent diversifier to almost any investment portfolio. As shown on the next page, including Brandywine in either a managed futures or equity portfolio can both increase returns and decrease risk.
As always, please feel free to contact us with any questions, comments or opportunities you may have.
Including Brandywine in Managed Futures & Equity Portfolios Both Increases Returns and Decreases Risk
(Non) Correlation of Brandywine’s Investment Programs to Other Investment Indexes
It is this non-correlation – combined with Brandywine’s repeatable investment process and broad strategy and market diversification – that makes Brandywine such a positive addition to most investment portfolios
Descriptions of the Brandywine Investment Programs
Brandywine trades pursuant to a fully-systematic model that incorporates a wide range of both fundamentally-based and technical trading strategies. Brandywine’s Symphony Program began trading in July 2011 and the performance of the other programs is extracted from the actual performance of trades executed within the Brandywine Symphony Program.
Diversified Portfolios
Brandywine Symphony
Brandywine’s most broadly diversified investment program:
- Trades in all liquid global financial and commodity futures markets (well over 100 markets)
- Trades pursuant to all Brandywine’s trading strategies
Brandywine Classic
Similar to Symphony in that it:
- Trades in all liquid global financial and commodity futures markets (well over 100 markets), but
- Incorporates all Brandywine strategies with the exception of the fundamental value strategies
Specialized Portfolios
Brandywine Monetary
Trades financial markets only:
- Trades in all liquid global currency, interest rate and stock index futures markets (over 60 markets)
- Trades pursuant to all Brandywine’s trading strategies relevant to the financial markets
Brandywine Alpha Hedge
Comparable to diversified technical trend following CTAs:
- Trades in all liquid global financial and commodity futures markets (well over 100 markets)
- Trades only pursuant to Brandywine’s alpha hedge trading strategies
See full PDF below.
