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Introduction
Welcome to the December 2010 Strategic Investment Review. A summary of this report is available below.
Performance update
view a video featuring Sam Yates from Man Investments Australia.
The Man OM-IP funds posted an average gain of 3.8%^ for the December quarter. Gains were driven by increased risk appetite following further US quantitative easing. However, European sovereign debt concerns dented confidence and offset some of the advances. The year ended on a note of optimism over the prospects for 2011. Read more.
Performance chart of Man OM-IP 220 vs stock market indices
This chart shows the performance of the first Man OM-IP fund, Man OM-IP 220, since its inception. The performance, net of fees, is compared to Australian and global stock market indices. View chart.
Fund prices for the Man OM-IP funds
The December 2010 fund prices for the Man OM-IP funds are available. View fund prices.
A New Year message from Tim Wong, CEO of AHL
2010 was a good year for AHL. Man AHL Diversified plc delivered a return, net of fees, for our investors of 14.8% over the year. This takes its annualised return since inception to 16.8%^^. Read more.
Emerging Markets review and outlook
Bart Turtelboom and Karim Abdel-Motaal, fund managers at GLG, believe that 2010 was filled with opportunity, especially for emerging markets and global macro funds. Read more.
^ Past performance is not a reliable indicator of future performance. The average performance figure for the Man OM-IP funds is an average quarterly return figure for all the Man OM-IP funds.
^^ Past performance is not a reliable indicator of future performance. As Man AHL Diversified plc is valued weekly, the quoted return of 14.8% relates to the period from 28 December 2009 to 27 December 2010. Fund inception date: 26 March 1996.
Performance update
view a video featuring Sam Yates from Man Investments Australia.
The Man OM-IP funds posted an average gain of 3.8%^ for the December quarter. Gains were driven by increased risk appetite following further US quantitative easing. However, European sovereign debt concerns dented confidence and offset some of the advances. The year ended on a note of optimism over the prospects for 2011.
Gains led by commodities and currencies
In commodities trading, profits were generated from energy, metal and agricultural sectors, with notable gains derived from long positions in crude oil, copper and cotton.
Crude oil closed the year above USD 90 per barrel due to a larger than expected fall in inventories, continued cold weather in Europe and high Chinese diesel consumption.
Copper soared to a record high towards year-end, driven by both supply issues and increased demand in Chinese and European industrial consumption.
Copper Future (USd/lb.)
1 January 2010 to 31 December 2010
Source Bloomberg.
Cotton also hit a record high following crop disappointments from major producers and growing demand in Asia.
Cotton Future (USd/lb.)
1 January 2010 to 31 December 2010
Source Bloomberg.
In currencies, trading over the fourth quarter proved profitable, despite a volatile November.
Short USD positions in October accrued solid gains as increased expectation of further monetary expansion by the US Federal Reserve weighed on investors' minds. Long EUR against USD and GBP also generated gains as traders reflected on the fact that the European Central Bank had not announced or suggested future quantitative easing in the eurozone.
During December, long positions in currencies with commodity focused economies (for example AUD) made profits. Short EUR positions also profited as the euro steadily lost value over December as Moody's downgraded Ireland's credit rating.
Profits made in October and December were partly offset by November performance, which was negative due to short USD positions. The greenback rebounded 3.3% on a trade-weighted basis resulting from an increase in 'safe haven' demand. Commodity-linked currencies also incurred losses as the USD's strength and a general sell-off in risk assets weighed on prices. In addition, long EUR versus JPY and GBP positions posted losses as the euro fell on rising concerns over European sovereign debt.
Optimism for 2011
In general, risk appetite pushed higher during the last quarter of 2010 largely due to the release of a number of better-than-expected corporate earnings and optimism for the prospects of 2011. The Man OM-IP funds were able to generate gains during this trading environment.
Sector attribution of the AHL Diversified Program
October 2010 to December 2010
Source Man Investments.
Note Past performance is not a reliable indicator of future performance. Performance figures are calculated net of all fees as at 31 December 2010.
^ Past performance is not a reliable indicator of future performance. The average performance figure for the Man OM-IP funds is an average quarterly return figure for all the Man OM-IP funds.
Performance chart of Man OM-IP 220 vs stock market indices
The chart below shows the performance of the first Man OM-IP fund, Man OM-IP 220, since its inception. The performance, net of fees, is compared to Australian and global stock market indices.
Man OM-IP 220 vs stock market indices
1 August 1997 to 31 December 2010
Source Man Investments Australia Limited.
Note Performance figures are calculated net of all fees as at 31 December 2010. Past performance is not a reliable indicator of future performance.
Fund prices for the Man OM-IP funds
The Man OM-IP funds below are closed to new investments. Please check products & prices for open funds. For more information on each fund, click on the fund name.
| Fund | Ccy | Inception | Valuation date | Rising Guarantee+ | Net Asset Value* |
|---|---|---|---|---|---|
| Man OM-IP 220 | |||||
| AUD | Aug 97 | 31 Dec 10 | $4.5987 | $5.9471 | |
| Man Series 2 OM-IP 220 | |||||
| AUD | Jan 98 | 31 Dec 10 | $4.3027 | $5.1584 | |
| Man Series 3 OM-IP 220 | |||||
| AUD | Jul 98 | 31 Dec 10 | $3.6965 | $4.2826 | |
| Man Series 4 OM-IP 220 | |||||
| AUD | Jun 00 | 31 Dec 10 | $3.1606 | $3.2184 | |
| Man Series 5 OM-IP 220 | |||||
| Matured | |||||
| Man Series 6 OM-IP 220 | |||||
| AUD | Jun 01 | 31 Dec 10 | $1.5605 | $2.4016 | |
| Man Series 7 OM-IP 220 | |||||
| AUD | Jun 02 | 31 Dec 10 | $1.3901 | $2.2136 | |
| Man Series 8 OM-IP 220 | |||||
| AUD | Nov 02 | 31 Dec 10 | $1.4330 | $2.0216 | |
| Man Series 9 OM-IP 220 | |||||
| AUD | Oct 03 | 31 Dec 10 | $1.1810 | $1.6318 | |
| Man Series 10 OM-IP 220 | |||||
| AUD | May 05 | 31 Dec 10 | $1.2155 | $1.6494 | |
| Man Series 11 OM-IP 220 | |||||
| AUD | Apr 06 | 31 Dec 10 | $1.0105 | $1.2432 | |
| Man Series 12 OM-IP 220 | |||||
| AUD | Dec 07 | 31 Dec 10 | $1.0000 | $1.0629 | |
| Man OM-IP 220 2008 | |||||
| AUD | Dec 08 | 31 Dec 10 | $1.0000 | $1.0085 | |
| Man OM-IP 320 Diversified | |||||
| AUD | Dec 98 | 31 Dec 10 | $2.0824 | $1.6154 | |
| Man OM-IP Strategic | |||||
| AUD | Aug 99 | 31 Dec 10 | $2.6834 | $2.2371 | |
| Man OM-IP Strategic Series 2 | |||||
| AUD | Dec 99 | 31 Dec 10 | $2.0970 | $2.1355 | |
| Man OM-IP Hedge Plus | |||||
| AUD | Jan 02 | 31 Dec 10 | $1.2221 | $1.4375 | |
| Man OM-IP 130 Plus | |||||
| AUD | Jul 03 | 31 Dec 10 | $1.5028 | $1.5469 | |
| Man OM-IP 140 Plus | |||||
| NZD | Aug 03 | 31 Dec 10 | $1.6060 | $1.6729 | |
| Man OM-IP 140 Plus (AUD) | |||||
| AUD | Jun 04 | 31 Dec 10 | $1.5879 | $1.5793 | |
| Man OM-IP 150 Plus (NZD) | |||||
| NZD | Jun 04 | 31 Dec 10 | $1.7016 | $1.7368 | |
| Man Series 2 OM-IP 150 Plus (NZD) | |||||
| NZD | Aug 05 | 31 Dec 10 | $1.5000 | $1.3120 | |
| Man Series 2 OM-IP 140 Plus (AUD) | |||||
| AUD | Aug 05 | 31 Dec 10 | $1.4000 | $1.2299 | |
| Man OM-IP MultiStrategy | |||||
| AUD | Jan 04 | 31 Dec 10 | $1.0661 | $1.0527 | |
| Man OM-IP 15seven | |||||
| AUD | Oct 04 | 31 Dec 10 | $1.1347 | $1.8193 | |
| Man Series 2 OM-IP 15seven | |||||
| AUD | Dec 06 | 31 Dec 10 | $1.0181 | $1.3045 | |
| Man OM-IP Stratum | |||||
| AUD | Dec 04 | 31 Dec 10 | $1.0358 | $1.3209 | |
| Man OM-IP 16eight | |||||
| AUD | Dec 05 | 31 Dec 10 | $1.0449 | $1.4601 | |
| Man OM-IP Eclipse | |||||
| AUD | Aug 06 | 31 Dec 10 | $1.1210 | $1.4865 | |
| Man OM-IP 2Eclipse | |||||
| AUD | Apr 07 | 31 Dec 10 | $1.0771 | $1.3384 | |
| Man OM-IP 3Eclipse | |||||
| AUD | Apr 08 | 31 Dec 10 | $1.0000 | $1.0540 | |
| Man OM-IP Eclipse 2010 | |||||
| AUD | Apr 10 | 31 Dec 10 | $1.0000 | $1.1112 | |
| Man OM-IP Vision | |||||
| AUD | Aug 07 | 31 Dec 10 | $1.0000 | $1.0387 | |
| Man OM-IP Essential | |||||
| AUD | Aug 08 | 31 Dec 10 | $1.0290 | $1.1619 | |
| Man OM-IP AHL | |||||
| AUD | Apr 09 | 31 Dec 10 | $1.0000 | $1.0794 | |
| Man OM-IP 2AHL | |||||
| AUD | Jul 09 | 31 Dec 10 | $1.0000 | $1.0742 | |
| Man OM-IP 3AHL | |||||
| AUD | Dec 09 | 31 Dec 10 | $1.0000 | $1.1247 | |
| Man OM-IP AHL 2010 | |||||
| AUD | Aug 10 | 31 Dec 10 | $1.0000 | $1.0149 | |
* Past performance is not a reliable indicator of future performance. Performance figures are calculated net of all fees as at the valuation dates shown for each fund.
+ The Capital Guarantee and Rising Guarantee applies to shares held on the maturity date and are subject to the terms of the guarantee for each fund.
A New Year message from Tim Wong, CEO of AHL
January 2011
2010 was a good year for AHL. Man AHL Diversified plc delivered a return, net of fees, for our investors of 14.8% over the year. This takes its annualised return since inception to 16.8%^^.
2010 performance review
At various points in 2010, investors' optimism for a strong recovery was quickly replaced by fears of a double-dip recession. This was exacerbated by fluctuating economic data and concerns over the effects of a second stage of quantitative easing. Despite these 'twitchy' conditions, we were able to identify and exploit trends across a number of markets for our investors. In fact, performance in the majority of sectors was positive for the year with the gains in bonds, currencies and interest rates overcoming losses in energies and stocks.
In the critical months of May and August when the S&P/ASX 300 (Accum.) Index suffered losses of -7.5% and -1.1% respectively, our program closed those months with returns of -1.9% and 6.8%. October was our strongest month (8.4%) as the expectation of further quantitative easing by the Federal Reserve contributed to a significant sell-off in the US dollar.
Trend following strategies are always susceptible to reversals or choppy market conditions and performance will be difficult in such periods. In this respect 2010 was no different. November was a particularly challenging month with a cluster of negatively contributing trades across a range of markets - currencies and interest rates in particular. These reversals caused us to give back most of our October gains.
Overall, I was very pleased at how our programs limited losses throughout the year, with our various risk management tools reacting appropriately, especially during the more difficult periods.
Research wins and pipeline
It is important to mention the positive impact that our research-based program enhancements have had on performance in 2010. These enhancements have improved our 'defensive' capabilities when markets reverse, as well as our ability to capture profits for investors.
We continually look to evolve and enhance our trading systems and have a rolling program of research at various stages from development to implementation. In 2010, several years of research effort came 'online', including enhancements to our portfolio construction and the introduction of new predictors.
We enter 2011 with a very rich research pipeline supported by our highly skilled research team. We now have more than 80 research personnel, making ours one of the deepest and most experienced teams in the industry.
Our research efforts continue to receive a significant boost from our unique collaboration with the University of Oxford - the Oxford-Man Institute of Quantitative Finance (OMI). Many of OMI's key research areas (econometrics, information engineering, computing) are in fields directly aligned with AHL's own technical capabilities. Encouraged by its success to date, Man recently extended its support for OMI for another five years.
Markets, policy and the long term perspective
I think 2011 will probably be very challenging for traditional asset classes. The continued reduction in bond yields combined with ongoing uncertainty in the stock markets has raised significant concerns among investors looking for reasonable returns from their investment portfolios.
By contrast, AHL has a strong track record of successfully trading through periods of uncertainty and challenging market environments. This has been regardless of whether stock, bond and other markets have risen or fallen.
Over AHL's 23 year history, the dynamic and responsive positioning of our trend following strategy across a diverse range of markets has enabled us to generate consistent performance with low correlations to traditional assets. In an increasingly uncertain world, the experience, resources and research capabilities of AHL put us in a good position to continue to capitalise on market opportunities to provide strong and uncorrelated performance for clients.
Tim Wong
CEO of AHL
^^ Past performance is not a reliable indicator of future performance. As Man AHL Diversified plc is valued weekly, the quoted return of 14.8% relates to the period from 28 December 2009 to 27 December 2010. Fund inception date: 26 March 1996.
Emerging Markets review and outlook
Bart Turtelboom and Karim Abdel-Motaal, fund managers at GLG, believe that 2010 was filled with opportunity, especially for emerging markets and global macro funds.
According to these two fund managers, some of the most fascinating and tradable macroeconomic developments unfolded last year, for example the Greek and then evolving Eurozone public debt crisis. Furthermore, there were some microeconomic events in 2010, such as the conflict related dislocations in Korea and Thailand and the political issues in Venezuela and Argentina, that also created opportunities particularly for emerging markets and global macro funds. In addition, the Chinese march towards development continued to provide all sorts of long and short opportunities for fund managers.
Looking ahead to 2011, the two GLG fund managers believe there will continue to be trading opportunities similar to some of the 2010 themes:
- The business cycle in the US, Europe and Japan is moving into a tepid recovery phase, one still fragile, which central banks will continue to support with different degrees of vigour. This will offer opportunities.
- The European public debt crisis is not over and the institutions of fiscal union are still a work in progress and the European Central Bank, to date, is resisting complete monetisation (which was the response from the US and Japan to their financial crises). Most analysts and commentators expect to see this situation further unfold in the near future.
- Within emerging markets, China will probably continue to lead the way with India, Russia, Brazil, Turkey, Egypt, Mexico and South Africa playing increasingly supportive roles. Important excesses, however, have emerged as these economies try to intermediate historic capital inflows through managed exchange rates and underdeveloped banking systems. Trading in this environment is unlikely to be smooth sailing.
Although the near future might be challenging, Mr Turtelboom and Mr Abdel-Motaal contend that the long term outlook for emerging markets is optimistic and that the vibrant and quickly maturing group of emerging market countries represent some of the key drivers of growth in 2011.