The Longboard Managed Futures Strategy Fund was down -1.48% on the month as losses in commodities and stock indexes outweighed significant gains in fixed income.
May marked the end of the 2019 winning streak for domestic equities as central banks and earnings took a back seat to renewed political turmoil. President Trump ratcheted up the trade wars by increasing tariffs to 25% on $200 billion of Chinese imports, as well as a 5% tariff on all Mexican imports. China retaliated with tariffs of their own on $60 billion of U.S. imports. This was followed by weaker industrial production data out of both the U.S and China which pushed equities lower.
Eurozone issues also moved to the forefront later in the month as Germany posted weaker than expected data, and UK Prime Minister May announced she would step down June 7th. This led to speculation of a hardline Brexit scenario which coincided with centrist parties losing seats in a European Parliamentary election.
These events fueled a risk off trade domestically and internationally, leading to lower interest rates globally. The U.S. yield curve was lower across the board and remain inverted. While the fund exposure to gold and oil remained neutral, WTI crude finishing the month down 16% and gold had a more up and down path finishing the month slightly higher as trade war fears outweighed a stronger U.S. dollar. Finally, grains saw a large rally as rainy conditions severely delayed planting domestically. The surge in prices negatively impacted performance as the fund was significantly short grains in May.Performance (as of 3/31/2019)
The risk off nature of the market had a mixed effect on the portfolio. Our long position in fixed income benefited greatly and currently stands at its highest risk allocation since inception. Meanwhile, equities sold off, causing us to exit several positions and bring our risk allocation back down near all-time lows. Despite exiting some agricultural products at the end of the month, we remain mostly short commodities, specifically softs and grains. Overall the fund continues to be balanced with a preference to fixed income over equities.
Given our current positioning, the fund is positioned to take advantage of global weakness and flight to quality trades. Our largest position is long fixed income, both domestically and internationally. We also remain long the U.S. dollar versus other currencies and continue to add long Japanese Yen positions. The fund remains on the low end of its historical number of positions, which gives us the opportunity to capture trends as they emerge.
Equity weakness cause the fund to exit several long positions at a loss.
The global bond rally led to large gains with every position in this sector positive on the month.
Currencies were choppy given the political turmoil but long U.S. dollar and Japanese Yen positions continued to profit.
A sharp rally in grains hurt our short positions, while other commodity positions were flat.