The Dual Momentum Fund – August 2018 Investment Report
August saw a prompt resumption of positive returns with the Fund adding +6.76% for the month, taking returns since inception to a very pleasing +101.96% or +14.56% per annum.
Global returns continue to be particularly unbalanced, with only the USA (Nasdaq) providing significant strength for the month (+5.71%). Japan, Australia and USA (NYSE) posted small positive returns, while all other markets weakened. Our system has responded to this further softening by signalling a suspension of new investment in the German and UK markets, adding to Singapore and Hong Kong which had met this condition late in July. Our current allocations to these markets is small at just 11.5%, having reduced from about 15.5% at the start of the month. Allocations to the US markets rose from 54.2% to 67.7% during the month, while most others remained steady or were reduced. In line with our broader investment style, our significant US holdings in both the Nasdaq (49.5%) and NYSE (18.3%) markets is not reflective of a particular thematic view of their potential, but rather the outcome of assessing individual stock opportunities on their merits and taking these opportunities as they arise. Put simply, stronger markets provide a greater number of investment opportunities for us, and so our portfolio will organically gravitate to those markets providing the best opportunities. This has enabled the portfolio to remain virtually fully invested despite increasing softness in a growing number of global markets.
Weakness in the Australian dollar had a meaningful influence on our results for August, with a portfolio-weighted contribution of +2.71% for the month.
Our proven strategy of systematically targeting stocks whose individual share price is both increasing and outperforming over medium to long term time frames will continue to be applied. Our active bottom-up investment style will guide portfolio allocations such that they will continue to expand or contract in response to market risk and reward characteristics as they evolve over time.
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