January net performance was positive 0.27%. It was a volatile month as the new Trump administration took office in the White House. Various leaks regarding tariffs and critical appointments washed through the market prior to the inauguration. Limited alpha was captured over the month by the fund, as markets wrangled with crosscurrents of unnerving headlines and still resilient data. Year-end volatility was subdued, reducing the need for markets to correct extreme pricing in the new year as has happened on previous occasions. Over the month the portfolio added five new strategies while two trades hit target, one stopped out and one was exited.
Cross Currency Interest Rate trades were the most volatile Risk Type within the portfolio and a net draw. The detracting elements were provided by weak Swedish inflation data giving ammunition for further cuts and leading their rates to outperform vs our Norway and GBP pairings. Additionally, short end rates for Canada continued to make new negative wides versus the US, we took advantage adding to existing risk. Providing some positive offset, Australia is showing signs of an economic slowdown and rates contracted vs NZD, meanwhile the fund benefitted from our exposure to long end Japanese rates vs Europe.
Curve trades performed strongly, benefitting from the re-steepening of interest rate curves that the fund has exposure to, notably in Europe, US and Australia. In addition, idiosyncratic relative value curve relationships have partially corrected over the month in UKT and NZGB bonds.
Spread trades were the next biggest positive contributors, with new French IOTA risk starting well, along with EUR 3s6s basis in the long end of the forward curve and Canadian 5yr Govt bonds tightening on asset swap spread.
FX and Volatility trades were modest detractors over the month; however, these were mostly offset by our Duration and Inflation positions.
