Q4 | 2021



Reflecting on the Q3 2021 earnings season, a common theme was observing companies posting top-line revenue beats,
though some missing expectations on bottom-line earnings-per-share (EPS) and providing slightly softer guidance on future
growth as many of the companies noted continued challenges with supply chain disruptions, persistent raw material
inflation, and ongoing labor shortages. Despite these challenges, the S&P 500 in aggregate posted YoY revenue and EPS
growth of 17.37% and 39.10%, respectively, with each consecutive quarter of company results moving the YoY comps
further away from the time periods most heavily impacted by COVID. Jobs data releases have been a consistent bright spot,
with initial jobless claims decreasing to historically low levels last witnessed in 1968 and the unemployment rate nearly
back to pre-COVID levels, though YoY inflation continued unabated, moving higher and ending the year at 7%. A defining
event of the quarter was the emergence of the omicron strain of COVID-19 that was first discovered in South Africa in late
November 2021, that swiftly spread throughout the globe during the holidays. Markets fluctuated as more data came to light
on the mild nature of the virus compared to prior strain variations, but ultimately recovered back all losses caused by the
omicron news and ended the year just shy of all-time highs. During the November meeting, the U.S. Federal Reserve
announced the first reduction in the pace of asset purchases, though not long after during the December meeting it was
signaled that a faster pace of winding down asset purchases and introducing rate hikes was likely warranted over the coming
quarters due to the acceleration in inflation risks, the labor market “rapidly approaching” maximum employment, and the
potential economic impacts caused by the omicron variant. Given these developments, the majority of Fed officials now
envision hiking rates three times which could begin as early as March 2022.

The S&P 500 and Nasdaq ended the Q4 2021 period up 11.03% and 8.28% respectively, whereas the Dow ended the quarter
up 7.37%. Supported by strong US performance, the MSCI World Index posted a gain of 7.77% for the quarter, versus the
MSCI Emerging Market Index which was down –1.31%, influenced by China’s negative performance over the quarter.
High yield bond spreads saw a small decrease of 5 basis points during the quarter, treasury yields saw upward movement at
the front-end with the 2-year increasing by 45bp as expectations for the upcoming rate hikes continued to materialize,
whereas the 10-year ended Q4 2021 unchanged versus the prior quarter.



Hedge funds closed the year on a positive note as the HFRI Fund-of-Funds Composite Index rose by 0.2% during
the fourth quarter, which brought the index’s 2021 return to +5.9%. Specifically, ‘Event Driven’ and ‘Equity Hedged’
strategies were among the top performers during the quarter as the HFRI Event Driven Index and HFRI Equity Hedged
index rose by 1.5% and 0.8%, respectively. Most global equity markets closed the year strong as robust corporate earnings
growth and ongoing government stimulus outweighed investors’ fears of rapid rising Covid-10 cases due to the Omricon
variant. We believe the alternative sector will continue to be an important part of investment portfolios as we expect to see
an increase in market volatility during 2022. We remain confident with the current managers on our platform and are excited
to potentially add new strategies to our list of managers during 2022.
*Data taken from HFRI (Hedge Fund Research Indices) as of January 18th, 2022