The alternative sector ended the year on a positive note as the HFRI Fund-of-Funds Composite Index rose by
2.1% during the fourth quarter and 8.3% for 2019, which is the index’s best performance since 2013. Global
markets closed the year on a positive note as the Federal Reserve cut interest rates by 25 basis points and trade
uncertainty faded as the U.S. and China announced a “phase one” trade deal. Specifically, ‘Equity Hedged’ and
‘Event Driven’ strategies were among the best performing strategies as the HFRI Equity Hedged (Total) Index
and HFRI Event Driven (Total) Index increased by 5.7% and 2.9%, respectively, during the quarter. We
are very pleased with all of our manager’s performance in 2019 as the majority of them healthily outperformed
their respective benchmarks. In light of the outsized performance in the long equity markets, we want to remind
investors that our hedged managers should not be compared to equity indices as our manager’s net exposure at
times is significantly lower than equity indices, which have 100% market exposure at all times.

*Data taken from HFRI (Hedge Fund Research Indices) as of January 15th, 2020

Filed under: Q4 | 2019 by Aldo Tarantini
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While the equity markets roared ahead, the US treasury curve steepened during the fourth quarter. Short term
yields in the two-year range fell, while longer term yields rose. The Federal Reserve drove these movements in
rates as the markets priced the expectation of continued low overnight rates. The 10-year treasury yield rose 25bps
from 1.66% to 1.91%, and the 30-year yield rose to 2.39% from 2.11%. High yield corporate bonds participated in
the risk rally with prices rising, and yields falling from 5.65% to 5.19% on the Bloomberg Barclays US corporate
high yield index. Prices on municipal bonds also rose with yields 15-20bps lower on maturities out to 5 years
and yields relatively unchanged on maturities 10 years and longer.

Filed under: Q4 | 2019 by Aldo Tarantini
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Fueled by a Federal Reserve intent on keeping interest rate levels intact despite any changes in inflation,
equities rose 9.1% in the fourth quarter of 2019 as measured by the S&P 500. This gain was predominantly driven
by expansion in the price-to-earnings multiple of the S&P 500 stocks from 19.6x at the end of the third
quarter to 21.6x at year end. The combination of factors including a benign Federal Reserve policy, a strong but
unspectacular economy, and falling trade tensions have driven investor confidence resulting in
valuations moving higher with few appealing alternatives. Mega cap technology stocks drove the Nasdaq to a
12.5% quarterly gain. Overseas stocks participated as well with the MSCI World and MSCI Emerging Markets
indices rising 8.7% and 11.7% on the quarter respectively. Sector wise, technology and health care drove the
majority of the gains up 14% each.

Filed under: Q4 | 2019 by Aldo Tarantini
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