Continued above-average returns
A look at the long-term history shows: Over the past five years, similar returns of around 40.2% p.a. have been achieved. Over the same period, volatility was 27.9%, and the maximum drawdown on a monthly basis was 19.6%, which - from a historical perspective - has also improved over time.
Alpha through good timing on the short side
High volatility and simultaneous declines in equity and fixed income markets amid rising commodity futures provided many opportunities for active market participants in the first half of the year. On the equity side, the Intalcon Alpha for Impact Global Fund partially cushioned price declines by overweighting the Basic Materials and Energy sectors while underweighting technology and consumer cyclical stocks. The net equity exposure (for favourable tax treatment the fund maintains an average equity allocation of 51% over the year), which is very actively managed in the fund with the help of index futures, was short overall through several short positions in the S&P 500, Nasdaq 100, Russell 2000 and the DJ Euro Stoxx 50, thus making the largest contribution to positive performance. The long position in the U.S. dollar also had a positive impact on overall performance.
Current positioning
As of the end of June 2022, the Intalcon Alpha for Impact Global Fund has a low gross equity exposure of less than 60% by long-term standards. Regionally, the U.S. makes up the largest portion of the equity portfolio. The largest positions include shares of Bristol-Myers Squibb, BYD, and Alphabet, as well as Zoom Video, Baidu, and Elastic NV. The relatively low equity weighting is fully neutralised on a net basis by open short positions in the S&P 500, Nasdaq 100, Dow Jones and the DJ Euro Stoxx 50. On the commodities side, short positions are held in oil futures and several agricultural futures as of the reporting date. However, due to the active trading style, the positioning can change very quickly depending on the market situation.
Diversification - more important but harder to achieve than ever before
The combination of active, rule-based long/short strategies, strict risk management and maximum diversification on the asset, strategy and time scale delivers clear added value - regardless of the market situation. For example, over the last 5 years, the Intalcon Alpha for Impact Global Fund shows minimal correlation to the equity market (-0.13), bond market (0.13) and commodity market (0.00). Empirical observations show that bonds as a classic addition to a portfolio lose significant diversification potential in times of rising inflation or increasing stagflation risks, i.e. when the correlation to equities rises from negative to positive territory. In this case, investments in commodities are more suitable, although they are not a buy-and-hold asset class: Due to the pronounced boom-bust cycles, active timing is required here to achieve success.
Improved risk-return profile for traditional portfolios
The Intalcon Alpha for Impact Global Fund is ideally suited to improve the risk-return profile of traditional portfolio structures thanks to active management and low correlation to equities and bonds. The classic 60/40 portfolio - consisting of 60% equities (MSCI World) and 40% bonds (FTSE World Government Bond G7) - is used in the table below as a basis to demonstrate the positive effects to be found through diversification by adding the Intaldcon Alpha for Impact Global Fund. An annual rebalancing to the initial weighting is assumed. Examining the last 5 years, we see the following results (base currency: Euro):
To show the positive effects achieved by blending the fund with the Intalcon Alpha for Impact Global Fund, we simulate different weightings in the portfolio allocation in the following overview.
An allocation of 10% for example delivers almost a doubling of the portfolio return (13.8% from 7.21%) with almost unchanged volatility. A clear justification for introducing more diversification. Indeed, as little as a five percent blend with the Intalcon Alpha for Impact Global Fund (95% are allocated as a 60/40 portfolio) shows a massive improvement of the risk-return ratio: despite a slightly reduced volatility, the return increases by more than 350 basis points. This leads to an improvement of the Sharpe Ratio from the original 0.83 to 1.32.
From high returns to measurable impact
The actual purpose of the fund is to finance sustainable projects. Therefore, a large part of the performance fee and management fee - via the non-profit Intalcon Foundation - goes to measures to slow down global warming, to the protection of endangered species and to projects that improve living conditions in low-income countries. The fund thus makes a direct impact and is, so to speak, a hedge against the greatest threats of our time. Let's doing good with good returns.
Our fund shows that you can grow your capital, keep liquidity and support Impact in a meaningful way. Therefore, please support our mission "Alpha for Impact".
Important Note
The content of this article is for information only. It does not constitute investment advice or a recommendation to buy or sell any financial product. No guarantees or representations are made as to the accuracy, completeness or correctness of the information contained herein. The performance of the Intalcon Alpha for Impact Global Fund shown here represents the net result after deduction of trading costs and fees and after deduction of management fee and performance fee (Net Asset Value, NAV).
