MONTHLY MARKET REVIEW April 2015outpost.primebuchholz.com/april2015-mmr.pdf · Crude oil prices...
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MONTHLY MARKET REVIEW
April 2015
www.primebuchholz.com 603.433.1143
1
April marked a reversal of several key capital market trends, positively
impacting non-U.S. investments and real asset allocations. After rallying
sharply since July 2014, the U.S. dollar (USD) declined against most
developed and emerging markets currencies during April. Many global
equity markets also posted strong gains in local terms, led by emerging
markets (EM) equity and the currency moves served as a tailwind,
augmenting returns. Crude oil prices also rallied sharply amid the falling
USD and potential increased demand from China. This aided energy-
related equities and several commodity investments, which posted
negative absolute returns in the first quarter.
Emerging markets equities delivered healthy returns in April against a
backdrop of stabilizing commodity prices, a recovery in emerging markets
currencies, and the growing likelihood that monetary tightening in the
U.S. will be delayed. The MSCI EM Index advanced 7.7% for the month;
for the year-to-date (YTD) period, the Index is well ahead of domestic
equity and, to a lesser extent, non-U.S. developed equities. A recent trend
has been the dispersion of EM country performance, as leadership within
the developing world has varied in response to shifts in the market and
country-specific drivers of return. After significant losses in the first
quarter, both Brazil (16.8%) and Colombia (16.4%) rallied following
recovery in their respective currencies and commodity prices. Russia
(+17.3% USD, +6.6% local) also continued its recovery from 2014 with
the help of rising oil prices, some stabilization of geopolitical risks, and a
stronger ruble.
A notable positive outlier has been China, which gained 16.7% in April
and 26.2% YTD and has been a standout performer since mid-2014. The
country has managed a sustained rally despite slowing GDP growth and
-10%
0%
10%
20%
30%
40%
50%
Dec-14 Jan-15 Feb-15 Mar-15 Apr-15
Equity Cumulative YTD Returns
MSCI China
Shanghai Composite (LC)
MSCI EM
MSCI EAFE
S&P 500
Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr
S&P 500 1.0 1.0 1.9 13.0 16.6 16.7 14.3 8.3 Barclays TIPS 0.7 0.7 2.2 2.5 -1.8 0.2 4.0 4.4
MSCI EAFE (USD) 4.1 4.1 9.2 1.7 7.3 11.2 7.4 5.6 FTSE EPRA/NAREIT Developed 0.0 0.0 4.1 11.7 3.9 11.0 10.5 7.4
MSCI EME (USD) 7.7 7.7 10.1 7.8 2.9 3.2 3.0 9.6 S&P NA Natural Resources 7.6 7.6 6.0 -11.0 3.7 3.5 4.3 7.7
Barclays Aggregate -0.4 -0.4 1.2 4.5 2.1 2.6 4.1 4.7 Bloomberg Commodity 5.7 5.7 -0.5 -24.7 -11.9 -9.7 -5.0 -2.4
Barclays Long Treasury -3.1 -3.1 0.7 15.3 4.1 5.1 9.3 7.2 Fund Weighted HFRI 0.8 0.8 3.1 5.2 5.4 5.8 4.4 5.5
Barclays Global TSY (Unhedged) 1.1 1.1 -1.2 -5.5 -2.2 -1.8 1.7 3.1 Barclays 1-3 Month T-Bill 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.4
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MONTHLY MARKET REVIEW – April 2015
weak economic data, as investors have fully embraced the government’s
efforts to stimulate the economy through monetary easing. The People’s
Bank of China has cut policy rates multiple times over the course of the
equity rally. In April, it announced plans to introduce new easing
measures aimed at restructuring local government debt. China’s local
equity market—as measured by the Shanghai Composite Index—has seen
even stronger gains of 18.5% for the month and 37.4% YTD. It
benefited not only from the recent easing measures, but also the
government’s efforts to open the local market more broadly to outside
investment by easing restrictions on foreign investors and introducing
programs, such as the Shanghai-Hong Kong Stock Connect.
Though they were up 3.8% for the month, frontier equity markets failed
to keep pace with their emerging counterparts. A number of frontier
countries performed well during April, particularly those in Eastern
Europe, such as Romania (+13.3%), Slovenia (+12.6%), and Ukraine
(+11.4%) and countries more dependent on oil exports, such as Saudi
Arabia (+15.0%) and Nigeria (+9.4%). However, large frontier markets
such as Argentina (−1.3%) and Kenya (−1.5%) posted losses. Kenya
continued to struggle with violence stemming from militant attacks and
political unrest ahead of presidential elections in June, while Argentina
remained mired in recession.
Weakness in the USD positively impacted foreign equity markets. The
chart to the right displays a trade-weighted index value of the USD over
the past 10 years. Contrary to the sharp upward trend that began in July
2014, the USD declined against its major trading partners during the
month. Weakness was broad-based, as the dollar fell against most
emerging and developed markets currencies. In the developed world, the
Norwegian krone (+7.0%), Canadian dollar (+5.0%), euro (+4.6%), and
British pound (+3.6%) were all key currencies that rallied against the
greenback. Gains were even stronger for EM with notable strength in the
Russian ruble (+12.8%), Ukrainian hryvnia (+10.3%), Colombian peso
(+9.1%), Brazilian real (+6.0%), and Polish zloty (+5.4%).
The USD rally that began in the summer of 2014 started several months
before the conclusion of the Federal Reserve’s third quantitative easing
program in October. Investors believed diminishing monetary
accommodation would begin to put upward pressure on U.S. interest
rates. The U.S. economy continued to gain traction as 2014 came to a
close, compared to recessionary pressure in Europe and slowing growth
trends in China. This led many to believe the first Fed rate hike would
commence by mid-2015 and investors favored the U.S. dollar.
The trade-weighted dollar index reached a peak on March 18th following
the conclusion of the two-day Federal Open Market Committee (FOMC)
meeting. The FOMC modified its forward guidance and released
economic projections that showed a more gradual rise in the federal funds
rate. Furthermore, in the press conference that followed, Chair Janet
Yellen made statements that investors interpreted as being dovish. In the
ensuing weeks, a string of weak U.S. economic reports—along with
stronger economic growth in Europe and additional easing measures
from China—continued to put downward pressure on the dollar in April.
Crude oil prices rallied in April, surging 25.3% (WTI) on a combination
of factors. These included signs of slowing domestic production, lower-
than-expected stockpiles, the aforementioned weakened USD, and
increasing global demand for crude and refined products. After five
consecutive months of declining rig counts and falling production
investment, there was growing sentiment that domestic shale oil
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Trade-Weighted U.S. Dollar Index
Source: Federal Reserve Bank of St. Louis
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MONTHLY MARKET REVIEW – April 2015
production neared or reached its short- to medium-term peak.
Meanwhile, global demand benefited from increased crude purchases
from some countries in Europe and China. China is the second largest
consumer of crude and has been building its reserves thus far in 2015.
Further, news of China’s plans to introduce new economic stimulus
supported a stronger demand outlook as the measures are believed to
potentially further boost crude oil demand in the country.
After plunging 13.9% in the final quarter of 2014 and an additional 1.5%
in the first quarter of 2015, the energy-dominated S&P North American
Natural Resource Index advanced 7.6% in April. This pushed YTD
returns into positive territory (+6.0%). During the month, the more
commodity-sensitive equipment and services (+13.4%) and exploration
and production (+11.5%) sectors outperformed large diversified
integrateds (+4.4%). More stable and increasing oil prices drove
improved market sentiment around small and mid cap exploration and
production and equipment and service companies. In addition, returns in
these sub-sectors also appeared to benefit from the view that historically
low valuations provided an attractive entry point. To date, the balance
sheets and liquidity profiles of some companies in these spaces have been
supported by the commodity price hedges put in place prior to the sharp
decline in prices. They have also been aided by surprisingly open access
to new debt and equity capital in the public markets. Elsewhere in natural
resource equities, diversified metals and mining stocks grew 7.7% on both
the weakening dollar and industrial metal commodity price increases
(+7.8%). The sub-sector also advanced on expectations that planned
power production reforms in China would boost demand for copper,
lead, and other industrial metals in the next couple of years.
Indices referenced are unmanaged and cannot be invested in directly. Index returns do not reflect any investment management fees or transaction expenses.
Past performance is not an indication of future results.
This report is intended for informational purposes only; it does not constitute an offer, nor does it invite anyone to make an offer to buy or sell securities. Information herein has been obtained from third-party sources that are believed to be reliable; however, the accuracy of the data is not guaranteed and may not have been independently verified.
The content of this report is current as of the date indicated and is subject to change without notice. It does not take into account the specific investment objectives, financial situations, or needs of individual or institutional investors. All commentary contained within is the opinion of Prime Buchholz and intended solely for our clients.
Unless otherwise noted, Bloomberg was the source for data used in this report.
ABOUT PRIME BUCHHOLZ
Prime, Buchholz & Associates, Inc. was established in 1988 and has grown to become a
leading, uniquely independent investment advisory firm providing comprehensive
investment solutions for more than 300 institutional clients. Headquartered in
Portsmouth, NH—with offices in Boston and Atlanta—Prime Buchholz was one of the
first investment advisors to develop in-depth expertise in alternative investments such
as hedge funds, private equity, and real assets.
Our clients include educational endowments, private and public foundations, cultural
and faith-based organizations, health care and insurance organizations, pension plans,
and high net worth families. We work closely with our clients to create, implement,
and monitor investment policies and asset allocation strategies to meet their unique
investment goals.
Long-term client partnerships are a cornerstone at Prime Buchholz. We are
employee-owned, and clients can expect personal service from a deeply experienced
team that puts client needs first.
www.primebuchholz.com Tel: 603.433.1143
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0
3
5
8
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Market Yields
S&P 500 Yield 10-Year Treasury Yield
S&P 500 Yield Avg 10-Year Treasury Yield Avg
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Historical Trailing PE
S&P 500 MSCI EAFE MSCI EM
-3
0
3
6
9
12
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Historical U.S. Inflation
YOY Core CPI YOY CPI
Key Valuation Metrics Summary Current Period 1 Year Ago 15-Year Avg
Equities – Trailing P/E (x)
S&P 500 18.0 17.5 17.0
MSCI EAFE 16.4 16.2 15.3
MSCI EM 13.0 11.4 11.8
Credit – OAS (bps)
Barclays Aggregate 44 41 68
Barclays High Yield 439 344 583
Barclays IG Corporate 128 101 167
Deflation Hedging – Nominal Yields (%)
10-Year U.S. Treasury 2.0 2.6 3.7
30-Year U.S. Treasury 2.7 3.5 4.4
Inflation Hedging
10-Year U.S. TIPS Yields (%) 0.1 0.5 1.6
S&P Energy Equity Trailing P/E (x) 15.6 15.9 13.8
MSCI U.S. REIT Index Dividend Yield (%) 3.9 3.8 5.1
Non-U.S. Bonds
Barclays Global Treasury ex-U.S. Yield (%) 0.9 1.5 2.5
Barclays EM Local Currency Govt. Yields (%) 5.0 5.5 5.9*
* Emerging markets local debt data from July 31, 2008 to present
MACRO ENVIRONMENT
(%)
MONTHLY MARKET REVIEW – April 2015
15-Yr Avg Current
S&P 500 17.0 18.0
MSCI EAFE 15.3 16.4
MSCI EM 11.8 13.0
(%)
Avg Current
YOY Core CPI 3.8 1.8
YOY CPI 3.8 -0.1
4
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-15
-10
-5
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5
10
15
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Quarterly U.S. GDP Growth
-40
-30
-20
-10
0
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30
40
50
60
Year-Over-Year U.S. Corporate Profits (%)
(%) (%)
As of March 31, 2015
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As of December 31, 2014
MACRO ENVIRONMENT
0
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Historical Central Bank Policy Rates
BOJ BOE ECB Fed
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Market Inflation Forecast
U.S. Breakeven 10-year Index U.S. Breakeven 10-year Index Avg.
MONTHLY MARKET REVIEW – April 2015
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MSCI ACWI Returns by Region (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
MSCI ACWI 2.9 2.9 5.3 7.5 10.9 12.2 9.6 7.0
Developed Markets
MSCI EAFE 4.1 4.1 9.2 1.7 7.3 11.2 7.4 5.6
MSCI Europe ex-U.K. 3.2 3.2 8.9 -3.2 9.7 13.5 7.5 5.9
MSCI U.K. 6.9 6.9 5.9 -3.4 7.0 8.5 8.5 5.2
MSCI Japan 3.5 3.5 14.1 19.1 7.1 11.8 6.6 4.2
MSCI Asia ex-Japan 3.9 3.9 7.2 1.3 0.5 7.5 6.8 9.1
Emerging Markets
MSCI EM 7.7 7.7 10.1 7.8 2.9 3.2 3.0 9.6
MSCI EMEA 8.4 8.4 10.6 -3.0 -2.8 -1.8 0.1 6.0
MSCI Russia 17.3 17.3 39.2 -6.6 -10.8 -9.4 -5.0 3.3
MSCI EM Asia 7.0 7.0 12.6 18.2 9.7 8.7 6.6 10.7
MSCI China 16.7 16.7 26.1 48.1 20.9 15.0 8.6 15.7
MSCI India -6.5 -6.5 -1.5 14.1 7.5 8.9 1.0 12.1
MSCI EM LatAm 10.3 10.3 -0.3 -15.1 -13.2 -9.3 -5.5 9.4
MSCI Brazil 16.8 16.8 -0.3 -19.7 -15.6 -12.3 -9.5 9.3
MSCI ACWI Returns by Sector (%)
MSCI ACWI Sectors MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
Consumer Discretionary 1.3 1.3 7.1 14.5 16.3 17.3 15.5 9.8
Consumer Staples 1.6 1.6 4.1 7.4 7.3 12.4 13.3 11.2
Energy 9.6 9.6 6.2 -13.0 0.9 1.6 3.4 6.4
Financials 3.8 3.8 4.6 8.0 9.4 14.7 7.8 3.2
Health Care 0.0 0.0 8.4 21.1 21.6 24.4 19.2 10.7
Industrials 2.4 2.4 4.6 4.6 12.3 13.1 10.1 7.9
Information Technology 2.0 2.0 4.8 19.2 20.6 14.9 12.7 9.6
Materials 4.8 4.8 6.4 -3.5 2.4 0.4 0.8 7.3
Telecom 6.1 6.1 8.0 7.1 9.3 12.0 11.2 8.3
Utilities 2.7 2.7 -2.1 1.8 5.6 8.4 5.6 6.3
Equity Market Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
S&P 500 1.0 1.0 1.9 13.0 16.6 16.7 14.3 8.3
Russell 3000 0.5 0.5 2.3 12.7 16.7 16.9 14.3 8.7
Russell 2000 -2.6 -2.6 1.7 9.7 15.0 15.9 12.7 9.2
Russell 1000 0.7 0.7 2.3 13.0 16.8 17.0 14.5 8.6
NASDAQ Composite 0.9 0.9 4.7 21.5 23.4 19.0 16.3 11.0
MSCI ACWI (USD) 2.9 2.9 5.3 7.5 10.9 12.2 9.6 7.0
MSCI ACWI (Local) 1.5 1.5 6.5 14.7 14.7 15.6 10.9 7.3
MSCI ACWI ex-U.S. (USD) 5.1 5.1 8.7 2.6 6.1 8.7 6.0 6.3
MSCI ACWI ex-U.S. (Local) 2.2 2.2 11.4 17.2 13.7 15.3 8.7 7.2
MSCI EAFE (USD) 4.1 4.1 9.2 1.7 7.3 11.2 7.4 5.6
MSCI EAFE (Local) 1.2 1.2 12.1 18.2 14.7 18.2 9.6 6.5
MSCI EM (USD) 7.7 7.7 10.1 7.8 2.9 3.2 3.0 9.6
MSCI EM (Local) 5.7 5.7 10.9 17.4 10.1 8.6 6.7 11.1
MSCI Frontier Markets 3.8 3.8 0.5 -5.4 9.8 12.1 5.8 1.8
London – FTSE 100* 3.1 3.1 7.6 6.7 8.2 11.0 8.8 8.0 GBP
Japan – Nikkei 225* 1.6 1.6 12.7 38.7 20.6 29.3 14.1 7.6 JPY
Hong Kong – Hang Seng* 13.0 13.0 19.8 32.2 15.5 14.2 9.6 10.9 HKD
China – Shanghai Composite* 18.5 18.5 37.4 126.3 47.4 26.5 11.9 16.7 CNY
*Returns in local currency
6
GLOBAL EQUITY MONTHLY MARKET REVIEW – April 2015
0
10
20
30
40
50
60
70Equity Volatility
VIX Index V2X (Europe) Index VIX Index Avg V2X (Europe) Index Avg
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0%
5%
10%
15%
20%
25%
30%
35%
40%
Foreign Holdings of U.S. Treasury Securities
% Held by Foreign Investors Total Foreign Holdings of U.S. Treasury Secs.
As of February 28, 2015
Currency Rates (per U.S. Dollar) (% change)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year
Current
Spot Rate
U.S. Dollar Spot (DXY)* -3.8 -3.8 4.8 19.0 7.6 6.3 2.9 94.600
Canadian Dollar 5.0 5.0 -3.8 -9.2 -8.7 -6.5 -3.4 1.208
Japanese Yen 0.6 0.6 0.3 -14.4 -9.7 -12.6 -4.7 119.380
British Pound 3.6 3.6 -1.4 -9.0 -0.6 -1.8 0.1 0.651
Euro 4.6 4.6 -7.2 -19.1 -7.7 -5.4 -3.3 0.891
Swiss Franc 4.3 4.3 6.6 -5.6 -0.2 -0.9 2.9 0.932
Australian Dollar 3.9 3.9 -3.3 -14.9 -12.7 -8.8 -3.1 1.265
Brazilian Real 6.0 6.0 -12.1 -26.1 -18.5 -14.1 -10.4 3.015
Chinese Yuan/Renminbi -0.1 -0.1 0.0 0.9 -0.3 0.4 1.9 6.203
GBP/Euro -0.9 -0.9 6.2 12.4 7.7 3.7 3.6 0.731
Yen/Euro -3.8 -3.8 8.0 5.8 -2.1 -7.6 -1.4 133.990
*Index measures value of USD relative to basket of foreign currencies
Bond Market Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year Curr.
Barclays 1-3 Month Treasury 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.4 USD
Barclays 1-3 Year Treasury 0.0 0.0 0.6 0.9 0.7 0.6 1.0 2.6 USD
Barclays Long Treasury -3.1 -3.1 0.7 15.3 4.1 5.1 9.3 7.2 USD
Barclays Intermediate Treasury -0.1 -0.1 1.2 2.7 0.9 1.2 2.8 3.9 USD
Barclays Emerging Markets 2.2 2.2 3.1 2.3 1.4 4.5 6.6 7.7 USD
Barclays EM Local Currncy (Unhedged) 2.8 2.8 0.1 -5.0 -4.5 0.3 2.8 -
Barclays EM Local Currncy (Hedged) -0.4 -0.4 1.0 4.4 0.4 2.7 3.5 -
Barclays Global Treas (Unhedged) 1.1 1.1 -1.2 -5.5 -2.2 -1.8 1.7 3.1 USD
Barclays Global Treas (Hedged) -0.7 -0.7 1.2 6.7 3.7 4.2 4.2 4.5 USD
Barclays Glob Treas x-U.S. (Unhedged) 1.8 1.8 -2.0 -8.8 -3.4 -3.1 1.1 2.6 USD
Barclays Global Treas x-U.S. (Hedged) -0.8 -0.8 1.2 7.5 4.6 5.1 4.5 4.5 USD
Barclays Municipal Bond -0.5 -0.5 0.5 4.8 2.6 3.5 4.7 4.6 USD
Barclays Aggregate -0.4 -0.4 1.2 4.5 2.1 2.6 4.1 4.7 USD
Barclays Eurozone Government -1.4 -1.4 2.8 11.0 7.5 8.4 6.3 5.1 EUR
- Austria -1.4 -1.4 2.3 11.0 5.9 7.1 6.4 5.4 EUR
- Belgium -1.6 -1.6 3.1 12.8 7.3 8.8 7.0 5.6 EUR
- Finland -1.0 -1.0 1.8 8.6 4.5 4.9 5.2 4.9 EUR
- France -1.2 -1.2 2.7 10.8 6.1 7.2 6.0 5.2 EUR
- Germany -1.4 -1.4 2.3 9.3 4.6 4.4 5.3 4.8 EUR
- Ireland -0.8 -0.8 2.3 10.1 9.6 14.5 10.0 6.2 EUR
- Italy -1.6 -1.6 3.9 12.4 10.8 12.3 7.5 5.6 EUR
- Netherlands -1.3 -1.3 2.4 10.2 5.4 5.6 5.7 5.1 EUR
- Portugal -1.1 -1.1 4.5 11.3 13.9 22.0 9.8 6.1 EUR
- Spain -1.7 -1.7 2.2 11.2 10.7 12.2 7.3 5.4 EUR
Barclays Sterling Gilt -2.3 -2.3 0.0 11.3 3.9 4.6 6.8 5.9 GBP
Barclays Japan Treasury 0.3 0.3 -0.2 3.3 2.2 2.4 2.4 2.0 JPY
Barclays G4 Treasury 1.0 1.0 -1.5 -4.0 -1.3 -0.7 2.2 3.3 USD
Barclays Majors 1.0 1.0 -1.3 -5.6 -2.2 -2.2 1.7 3.1 USD
7
GLOBAL BONDS MONTHLY MARKET REVIEW – April 2015
-3
-2
-1
0
1
2
3
4
0 5 10 15 20 25 30
Yie
ld
Year
U.S. Treasury Yield Curves
12/31/2014 3/31/2015 4/30/2015
TIPS 12/31/2014 TIPS 3/31/2015 TIPS 4/30/2015
(%)
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Credit Market Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
Barclays U.S. Corporate -0.7 -0.7 1.6 4.8 2.8 4.5 6.0 5.7
S&P Leveraged Loan 100 0.7 0.7 2.6 2.4 2.9 4.6 4.6 5.0
Barclays High Yield 1.2 1.2 3.8 2.6 4.4 7.5 8.3 8.4
Barclays MBS 0.0 0.0 1.1 4.6 2.6 2.3 3.5 4.8
Barclays CMBS -0.1 -0.1 1.7 3.8 2.4 3.7 5.8 5.4
Barclays ABS 0.1 0.1 1.0 2.0 1.1 1.6 2.9 3.4
HFRI Index Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
Fund Weighted 0.8 0.8 3.1 5.2 5.4 5.8 4.4 5.5
FI-Convertible Arb. 2.1 2.1 4.3 3.4 4.9 5.7 4.9 5.7
Distressed Restructuring 1.0 1.0 1.8 -2.6 4.0 6.4 5.3 5.7
Equity Hedge (L/S) 2.0 2.0 4.1 5.6 7.3 7.1 4.8 5.3
Eq. Market Neutral -0.5 -0.5 1.0 2.4 4.0 4.0 2.7 2.6
Event Driven 1.2 1.2 3.0 2.1 5.8 6.9 5.3 6.0
Macro/CTA -1.2 -1.2 1.9 7.9 2.5 2.3 2.0 4.6
Merger Arbitrage 1.1 1.1 3.5 4.7 4.4 3.7 3.4 5.2
Relative Value Arb. 1.4 1.4 3.2 4.3 5.0 6.8 6.2 6.6
NOTE: Returns are based on monthly HFRI Index data. HFRX Indexes are used when HFRI data is not available.
8
FLEXIBLE CAPITAL MONTHLY MARKET REVIEW – April 2015
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Short Interest Ratio – Total U.S. Markets (%)
0
2
4
6
8
10
12
14
16
18
20
Option-Adjusted Spreads
IG Corp. HY Corp. IG Corp. Avg HY Corp. Avg
$0
$100
$200
$300
$400
$500
$600
$700
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
To
tal D
eal V
olu
me (
$B
)
To
tal D
eal C
ou
nt
Deal Count & Volume ($B)
Deal Count Average Deal Count Volume (USD) Average Volume ($B)
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Real Asset Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
FTSE EPRA/NAREIT Dev’d 0.0 0.0 4.1 11.7 3.9 11.0 10.5 7.4
EPRA/NAREIT U.S. -5.9 -5.9 -1.5 12.9 6.9 10.8 12.8 8.2
EPRA/NAREIT Europe 2.5 2.5 8.7 9.1 14.7 17.7 13.4 5.2
EPRA/NAREIT Asia 4.0 4.0 6.9 9.4 -2.5 11.1 8.4 8.1
S&P NA Nat. Resources 7.6 7.6 6.0 -11.0 3.7 3.5 4.3 7.7
S&P GSCI 11.1 11.1 1.9 -34.2 -16.1 -13.8 -6.5 -5.6
Alerian MLP Index 6.2 6.2 0.6 -0.7 5.5 10.6 14.3 13.3
Bloomberg Commodity 5.7 5.7 -0.5 -24.7 -11.9 -9.7 -5.0 -2.4
Barclays TIPS 0.7 0.7 2.2 2.5 -1.8 0.2 4.0 4.4
MTD QTD YTD 1 Year 2 Year* 3 Year* 5 Year*
Current
Price
Gold $/oz. 0.1 0.1 0.0 -8.3 -10.4 -10.7 0.1 $1,184.37
WTI Crude Oil $/bbl 25.3 25.3 11.9 -40.2 -20.1 -17.2 -7.1 $59.63
Brent Crude Oil $/bbl 18.8 18.8 9.1 -34.7 -16.1 -12.5 -11.5 $66.78
*Annualized Price Change
Bloomberg Commodity Returns (%)
MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 10 Year
Bloomberg Commodity 5.7 5.7 -0.5 -24.7 -11.9 -9.7 -5.0 -2.4
Agriculture -0.5 -0.5 -9.3 -31.7 -14.5 -10.6 -0.5 0.2
Energy 13.8 13.8 4.5 -40.9 -20.5 -13.6 -13.5 -14.7
Industrial Metals 7.8 7.8 2.1 -3.3 -3.1 -8.0 -6.6 3.5
Precious Metals -0.8 -0.8 0.4 -11.0 -12.9 -13.6 -1.1 9.4
Livestock 1.7 1.7 -8.2 -10.6 3.0 1.2 -1.3 -6.3
(%)
9
REAL ASSETS MONTHLY MARKET REVIEW – April 2015
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MSCI U.S. REIT Index Div. Yield
MSCI U.S. REIT Index 10-Year Treasury Yield
MSCI U.S. REIT Index Yield Avg 10-Year Treasury Yield Avg
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000Historic Gold Price ($/oz.)
Inflation Adjusted Price Nominal Spot Price
$0
$20
$40
$60
$80
$100
$120
$140
$160WTI Crude Oil Spot Price ($/bbl)
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4
MONTHLY MARKET REVIEW – April 2015
Mergers and Acquisitions (M&A) is a general term used to refer to the consolidation of
companies. A merger is a combination of two companies to form a new company, while an
acquisition is the purchase of one company by another in which no new company is formed.
“Deal count” and “volume” each quantify the mergers and acquisitions activity occurring
within a given time period. Deal count represents the actual number of deals that were
completed each month, while “volume” represents the total dollar value of the deals that
were completed during the month. The premium is the difference between the actual cost
for acquiring a target firm versus the estimate made of its value before the acquisition.
Short Interest Ratio is an indicator that is derived by dividing the short interest by the
average daily volume for a stock. This indicator is used by both fundamental and technical
traders to identify the prevailing sentiment the market has for a specific stock.
U.S. Corporate Profits is a statistic reported quarterly by the Bureau of Economic Analysis
(BEA) that summarizes the net income of corporations in the National Income and Product
Accounts (NIPA). Corporate profits are an economic indicator that calculates net
income using several different measures: profits from current production; book profits, and
after-tax profits.
Barclays Aggregate Index comprises government securities, mortgage-backed securities,
asset-backed securities, and corporate securities to simulate the universe of bonds in the
market. The maturities of the bonds in the Index are over one year.
Barclays Global Treasury ex-U.S. Index includes government bonds issued by
investment-grade countries outside the United States, in local currencies, that have a
remaining maturity of one year or more and are rated investment grade.
Barclays U.S. TIPS Index is a rules-based, market value-weighted Index that tracks
inflation protected securities issued by the U.S. Treasury.
Bloomberg Commodity Index is composed of futures contracts on physical commodities.
It is composed of commodities traded on U.S. exchanges, with the exception of aluminum,
nickel, and zinc, which trade on the London Metal Exchange (LME).
Chicago Board Options Exchange Volatility Index (VIX) measures traders'
expectations of volatility in the stock market by tracking bid/ask quotes on the Standard &
Poor's 500 Stock Index.
FTSE EPRA/NAREIT Developed Index is designed to represent general trends in eligible
real estate equities worldwide. Relevant real estate activities are defined as the ownership,
disposure, and development of income-producing real estate. The Index series includes a
range of regional and country indices.
HFRI Fund Weighted Composite Index is designed to represent the performance of
domestic and offshore hedge funds across all strategies with the exception of fund of funds.
Comprised of over 2000 hedge funds, it is a fund weighted index in that all funds, regardless
of assets under management or other factors, are given an equal weighting.
HFRI Equity Hedge Index is designed to represent the overall composition of the equity
hedge (also known as long/short equity) universe. The Index is constructed with equally
weighted composites of constituents as reported by the hedge fund managers listed within
the Hedge Fund Research (HFR) database.
HFRI Event Driven Index is an equally weighted index that represents constituents
investing in opportunities created by significant transactional events as reported by the hedge
fund managers listed within the HFR database.
HFRI Macro Index tracks investment managers which trade a broad range of strategies in
which the investment process is predicated on movements in underlying economic variables
and the impact these have on equity, fixed income, hard currency and commodity markets.
MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization
weighted index that is designed to measure the equity market performance of developed and
emerging markets. The Index consists of a mix of developed and emerging market country
indices.
MSCI China Index is a free float-adjusted market capitalization weighted index that is
designed to measure the equity market performance of Chinese companies listed on the
Hong Kong exchange, which are frequently referred to as H shares.
MSCI EAFE Net Index is a free float-adjusted market capitalization index that is designed
to measure the equity market performance of developed markets, excluding the U.S. &
Canada.
MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization index
that is designed to measure equity market performance of emerging markets.
Russell 3000 Index measures the performance of the largest 3,000 U.S. companies,
representing approximately 98% of the investable U.S. equity market.
Russell 3000 Growth Index measures the performance of the broad growth segment of
the U.S. equity universe. It includes those Russell 3000 companies with higher price-to-book
ratios and higher forecasted growth values.
Russell 3000 Value Index measures the performance of the broad value segment of U.S.
equity value universe. It includes those Russell 3000 companies with lower price-to-book
ratios and lower forecasted growth values.
Russell Midcap Index measures the performance of the midcap segment of the U.S. equity
universe. The Index is a subset of the Russell 1000 Index. It includes approximately 800 of
the smallest securities based on a combination of their market cap and current Index
membership.
S&P 500 Index is a gauge of the U.S. equities market and includes 500 leading companies in
leading industries of the U.S. economy.
U.S. Dollar Index indicates the general international value of the U.S. dollar (USD) by
averaging the exchange rates between the USD and six major world currencies.
INDEX DESCRIPTIONS
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MK15013_050715 © 2015 Prime, Buchholz & Associates, Inc.