Thursday, June 2, 2016

Asset class performance for May

Since the gloom and angst of first two months of the year,  performance in the major asset classes have turned positive and looks good. Investors who have balanced holdings across asset classes or have a tilt to fixed income should be reasonably happy with performance year to date. While equities still lag fixed income, all major asset class categories are positive for the year except for global equities. Value stocks have done well versus small and large cap benchmarks. Emerging market stocks have also turned positive for the year. 
The best performing sector has been commodities as measured by the Bloomberg commodity index (DJP) with fixed income outpacing equity returns.

There has been strong performance with the long bond (TLT) as well as risky bonds in high yield (HYG) and emerging markets (EMB). Strong bond performance should not be expected in a Fed tightening environment or in a supposed stronger economic environment. It could be easily argued that there is a disconnect between bonds and equities and that the positive performance of both should not continue. we would agree that investors in fixed income have a different view than equity managers. In the future, only one can be right.

The negative views towards hedge funds should not be surprising when investors could have mixed and matched portfolios of major asset classes and outperformed most hedge fund styles. While this may not be a fair comparison, it is something that investors will be reviewing.

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