Market context: The market rebound witnessed in April continued in May on the back of positive market sentiment as countries around the world began to reopen their economies. We believe the positive sentiment is largely driven by investors’ fear of missing out on the market recovery, despite clear signs that global economic activity has plunged into recession. In Europe, Italy, Spain, France, and the UK seem to have passed the pandemic peak with the number of new confirmed cases falling. By contrast, countries in Latin America, in particular Brazil, Mexico, and Peru, have experienced a sharp increase in the number of cases, while daily new infection rates continued to rise in Russia. In the US, although the peak appears to be behind us, the number of new confirmed cases every day remains relatively high. Most states have started to loosen their mandatory lockdown measures, allowing businesses to gradually reopen. Although this will have a positive impact on the economy, a number of health experts fear that it could further spread the virus.

We would like to welcome our newest colleague, Alex Riteau, to the SystematicEdge team. Alex started his career with BNP Paribas, where he most latterly worked as a structurer at THEAM working on systematic multi-asset and equity strategies. He has a Masters degree from ENSAE in Statistics as well as an MSc in Risk & Asset Management from EDHEC Business School. We are excited to welcome Alex to the Portfolio Management team!

Institutional investors face constant pressure to deliver returns and reduce costs. They must deal with a range of challenges, including the impact of currency volatility on their investments. These investors include: Private Debt funds, Real Estate funds, Venture Capital funds, and Private Equity funds, including their portfolio companies.

MARKET CONTEXT: The valuation of Equity Markets rebounded in April within a dislocated global financial market. Asset-classes sharing common underlying risks such as equity (going up) and high yield corporate bonds (going down) are moving in opposite directions. Financial assets will remain volatile until the peak of the pandemic has passed. As we are progressively getting more data on the long lasting economic effects of the virus crisis, investors can identify opportunities to put money to work at a discount in market segments where there is visibility on how and when the capital will be returned and how the cash flow generation will participate to the total return of the investments.

Our latest whitepaper has been written for SMEs that do business cross border and are exposed to the volatility of foreign currencies. Many SMEs are at risk because they do not hedge their foreign currency exposure, resulting in the reduction of their profit margin or even losses. In some cases this can lead to bankruptcies. The reasons often cited by SMEs for taking this risk are due to the high costs usually associated with hedging and the lack of turn-key solutions in the market.