Antiloop Hedge - April 2023

As communicated in January, keeping the risk within our target of 0.5-1.0 VaR continues to be our main priority. Per the last of April, the fund’s VaR measured 0.6, meaning we are still in the lower range of our target.

The banking crisis continued into April but did not have much effect on US equities as the consensus view that the 25bp rate hike in May would be the last before a pause of tightening monetary policy from the Federal Reserve.

Commodities suffered a weak month in April as wheat and corn fell sharply. In the energy sector, heating oil, gas oil, and gasoline suffered losses, while crude oil, Brent crude, and natural gas achieved some price gains.

Gold and silver continued to show strength after bottoming out in March, and the gold price has since stayed above 2000 USD, while silver has, since the end of April, fallen back from 26 USD to 24 USD.

In April, Antiloop initiated a shift in the cash management strategy with the aim of allocating part of the firm’s cash to gold and silver instead of short-term debt instruments. This move is consistent with the firm’s view that real money (i.e. gold and silver) is a better place to store value than fixed income given the negative real yields that permeate the financial world today. Over time we aim for this position to account for around 30 percent of the fund’s AUM. This will, in the shorter term horizon, lead to higher volatility but also a higher correlation to the price of gold.

Strategy breakdown

The monthly performance was driven by the Global Macro strategies that profited on the volatility in both equities and commodities.  The Tactical Asset Allocation strategies also contributed as a result of a rally in sugar prices and strong European markets. In Long/Short Equity the short growth/long value-spread performed well as tech stocks fell while sectors like mining and energy rose during April.

Market outlook

Inflation: A case for gold

At Antiloop, we have been advocates for gold as a hedge against fiat devaluation and inflation since long before the vast majority thought inflation would ever be a problem for developed countries. But, since the central banks pushed the monetary policy over the edge after over a decade of too-loose policies, which catalyzed the beginning of the end of today’s reserve currency era, many had to wake up to a reality of spiraling prices.

 While it looks like the inflation rate is contained for now, there has not been a single inflationary event when the CPI has passed 5 percent when there has not been at least one more peak, and there are few factors suggesting it would be different this time.

Albeit history does not repeat itself, it often rhymes. But, if we were to compare today’s inflation rate with the 1970s, the resemblance is striking.

If inflation were to pick up again, sometime within 18-24 months, and rush for a second peak in line with the historical pattern, buying gold now will look like a bargain compared to later.