The Longboard Managed Futures Strategy Fund was up +2.26% on the month as gains in currencies, commodities and equities offset losses in fixed income.
In April, the global equity rebound carried on despite the International Monetary Fund (IMF) continuing to lower growth expectations. Both developed and emerging markets were up on the month, although they still trail the U.S. In central bank news we saw dovish talk as the Fed, ECB and Bank of Japan all signaled no tightening in 2019. A calmer political backdrop also served as a growth catalyst for the month.
Despite the Fed’s dovish tone, the U.S. dollar remained the relative strength leader in the world economy as it finished higher against the British pound and the euro. We also saw an increase in U.S. interest rates, which hurt the fund as we were long the domestic curve. However, the strength of the dollar helped to offset that loss as we remain long the U.S. dollar versus most international counterparts.
In commodities, WTI crude has rallied nearly $20 a barrel on the year as supply concerns from OPEC production cuts, and a ban on Iranian oil sales drove prices higher. Gold was slightly down as expected due to the stronger U.S. dollar. Meanwhile, short positions in soybeans, wheat, coffee and orange juice were beneficial to the portfolio as prices continued to fall.Performance (as of 3/31/2019)
The fund has rebuilt some of its equity exposure, bringing it close to its historical average. It now has some long exposure both domestically and internationally and will add to this position to take advantage of the bull market if the rally continues. Meanwhile, the fund offers robust diversification specifically in commodities, as that remains our largest exposure. Energy positions have been significantly cut and we currently hold no positions in crude oil. However, we continue to profit from substantial short exposure in grains and softs.
Even with considerable restructuring of the portfolio in recent months, the U.S. dollar strength trade remains our strongest/clearest position. We remain long versus most major currencies and our short positions in commodities stand to profit from the stronger dollar. The other major theme is long bonds across the globe allowing us to benefit from lower rates and further central bank easing. The fund also is currently at the low end of its historical number of positions, allowing us to benefit from new trends as they arise.
Equities contributed to gains for the first time in 2019 as new long positions were proftable amid the global rally.
Fixed income was a detractor after being a strong source of returns in March, we remain long global bonds.
Long U.S. Dollar positions continued to profit, and we benefited from a stronger Japanese Yen.
Commodities gained as short positions in grains and softs offset small losses in energy and meats.