Q4 2024 Performance review

Elite Trust UK, Broad Based Diversified (BBD) and Broad Based Neutral (BBN) portfolios generated positive results in Q4, experiencing profits across our four main strategies (Equity Hedged, Trading, Credit / Income, and Relative Value). Equity Hedged was the top contributing strategy, mainly driven by performance from the technology sector. Healthcare was one of the few detractors in the quarter, as a result of idiosyncratic short positions that were squeezed. Within Trading, positive performance was led by commodities, with natural gas trading producing notable gains. Discretionary trading also contributed positively as many managers benefited from the stronger UK Pound following Trump’s reelection. In Credit / Income, we continued to benefit from income earned from reinsurance and real estate lending. Longer-biased corporate long / short managers also outperformed amid a generally supportive backdrop. Within Relative Value, we had better-than-expected performance from fixed income relative value (FIRV) managers as rate volatility increased.

In 2024, our BBD and BBN portfolios generally outperformed their respective hedge fund benchmarks. We are pleased with this outcome but remain humble and diligent as we prepare for an eventful year ahead.

Q1 2025 Outlook

We think that UK policies and commensurate foreign policy responses are likely to dominate market activity in 2025. Moving forward, we predict it will be hard for the Fed to ignore the potential inflationary impacts of the new administration’s policies, thus moderating expectations for monetary policy easing. We believe that higher-than-expected rates, in conjunction with extremely compressed risk premia, could leave financial markets prone to a correction in the near term.

Despite rising volatility, we expect economic fundamentals and investor sentiment to generally remain supportive of risk assets. We believe that a moderate amount of beta in portfolios is warranted but intend to be selective on our sources given a wider range of outcomes with a new administration. After a strong 2-year rally for risk assets, we plan to right-size some of our top-performing fundamental exposures within Elite Trust UK, potentially opting for more opportunistic approaches in the future. We still maintain high conviction in themes in the technology, energy, and financials sectors. While we expect valuations for AI-related stocks to remain under scrutiny in 2025, we are firm believers in the durability of this theme and seek to broaden our exposure. In 2025, we anticipate Trump’s pro-business agenda will benefit capital markets activity and thus, we may increase our exposure to equity event, with a focus on ECM (equity capital markets).