Saemor Capital’s Europe Alpha Fund lost 2.6 per cent in April, bringing the YTD performance to -10.6 per cent. Most of the losses came from strong performances in the fund’s short book. 

As equity markets and commodity prices continued their rebound, market participants favoured higher risk and lower quality names, essentially the laggards of last year. Cyclical Value saw strong positive returns, while most other factors in our model suffered. 

Price momentum, profitability, growth and stability were particularly weak, while earnings momentum also displayed a negative pay-off. 

The picture was very similar to that of February and March, with the Fund having too much exposure to higher quality, defensive names, that rank well on a broad set of factors, but not on cyclical value. Fresnillo and Standard Chartered were the biggest performance detractors, both getting a boost from a renewed appetite in Emerging Market related stocks. 

Zodiac also contributed negatively, when rumuors about take-over interest from sector and country peer Safran hit the market. Zodiac had earlier reported its 6th quarter in a row of disappointing earnings and downgraded forecasts and thus was one of our largest short positions at the time. 

On the positive side there were a reasonable amount of companies reporting Q1 earnings in the fund’s favour, notably short positions in Cobham, Regus and Tesco. Our long position in paper producer UPM also payed off, after the company reported earnings and a full year outlook that came in well ahead of expectations. Other winners were longs such as BHP Billiton, Rio Tinto, ACS, Axa and BNP Paribas, driven by positive market returns and an increase in risk appetite among investors.