The fund returned a loss of -4.96% in May due to losses in the currency and fixed income sectors.
Equities generally continued to strengthen during May with the S&P ending the month more than 2% higher. In Europe, political developments pressured Italian and Spanish equities lower by 8% and 6%, respectively. Similarly, the U.S. dollar continued to rally, most notably strengthening versus the euro and British pound sterling.
Commodities posted mixed results with the energy complex continuing to strengthen in May as Iranian sanctions remained in focus. Fears of oversupply from Russia slowed strengthening oil prices towards the end of the month and brent crude ultimately finished 3% higher. Gold remained under pressure and ended the month lower by more than 1% on the heels of rising yields in the U.S.
Yields rallied during the month and made new highs when the U.S. 10-year yield traded above 3.12% mid-month before finishing May below 2.90%. The uncertain political environment in Italy weighed on sentiment and sent bond prices higher.Performance (as of 5/31/2018)
U.S. equities continue to shrug off a growing list of potential threats. These range from mounting trade tensions to rising yields and political instability in Europe. An earnings growth rate in the double digits appears enough to outweigh the potential negatives for now. Equities have continued to resume uptrends, however, the U.S. dollar is trading higher in contrast to the longer term down trend. Energy and fixed income markets ebb and flow with the seemingly endless headlines as well as geopolitical developments. As we look ahead into the summer, the uncertainties are likely to remain.
U.S. equities continued to strengthen in May. In the U.S., the IT sector outperformed on the back of strong Q1 earnings while the telecom sector finished nearly 4% lower. Globally, geopolitical tensions weighed on Italian and Spanish stock markets while a strengthening dollar pressured emerging market indexes lower as well.
We opened new long position in equities in the European CAC-40, FTSE 100, and OMX30. Elsewhere we closed long positions in MSCI Taiwan and MSCI Emerging Marketing Index. Our overall exposure remained relatively static during the month.
The yields in the U.S. 10-year bond reached new highs not seen since 2011 as continued signs of domestic economic growth pushed prices lower. However, a disruptive political landscape in Italy caused Italian yields to fall significantly. This had a knock-on effect internationally and the U.S 10-year yields closed below 2.9%.
We opened new long positions in European fixed income including bobl, bund, schatz, and buxl. These adjustments caused our overall portfolio exposure to fixed income to increase during the month of May.
The U.S. dollar continued to rally during May. The euro was the worst performing of the G10 currencies and ended the month nearly 4% lower due to continued political uncertainties and economic slowdown in the region.
We closed short positions in U.S. dollar versus Japanese yen, Norwegian krone, Swedish krona, Mexican peso, euro, Polish zloty, British pound, and Czech koruna. Elsewhere, we closed long positions in Australian dollar versus Canadian dollar and opened new long position in Swiss franc versus Japanese yen. Our overall exposure in currencies decreased slightly during the month.
The energy complex continued to strengthen in May. The U.S. exited the Iran deal and the administration discussed re-instating oil sanctions on Iran and Venezuela ultimately driving prices higher. The rally stalled towards the end of the month when headlines broke that Russia and Saudi Arabia discussed increasing supply. In precious metals, gold was caught between two macro themes, rising treasury yields and geopolitical uncertainties. After the tensions subsided, gold ended the month nearly 1% lower.
In metals, we closed long positions in zinc and gold and opened a new short position in platinum. In agricultural commodities, we closed short positions in milling wheat and opened a long position in orange juice. Our overall commodity exposure decreased during March, yet it remains our largest risk allocation for the time being.