Letter to Investors – 2024 Performance Review
During 2024, the Farview Alpha Fund delivered a return of 4.9%, compared to 19.2% for equities (as measured by the MSCI World Index) and -1.7% for fixed income (as measured by the Bloomberg Global Aggregate Index). Hedge funds returned 4.8%, according to the HFRX Absolute Return Index, which aligns with the fund’s objective of reduced exposure to broad market movements. Meanwhile, the HFRX Global Hedge Fund Index achieved a performance of 5.27%.
The fund experienced strong performance during the first three quarters of the year, but market dynamics in the final quarter presented challenges. Specifically, the relative outperformance of growth stocks compared to the broader market had a negative impact on the portfolio. This rotation occurred as valuations for many growth companies had already become stretched, and our managers were transitioning the portfolio toward value-oriented opportunities. However, during the quarter, growth stocks outperformed value stocks by 8%, as measured by the MSCI World Growth and MSCI World Value indices, leaving equities nearly flat for the period. Despite these headwinds, the fund’s equity market neutral exposure was the largest positive contributor to performance for the full year, followed closely by convertible arbitrage strategies.
Our Portfolio Performance
In 2024, our allocation to Equity Long/Short strategies was a top contributor, validating our decision to overweight this asset class. These strategies delivered an average return of 9.5%, and with an average portfolio exposure of 45%, they contributed approximately 4.1% to overall performance. Within this category, our Asia Equity Market Neutral strategy made a significant impact, benefiting from the rebound of earnings momentum as a key driver of stock performance. This marked a sharp turnaround from 2023, when positive earnings momentum failed to influence stock prices in Asia. Meanwhile, our global equity market neutral strategy skillfully navigated a challenging year for value stocks by increasing exposure to market sentiment factors such as momentum, market positioning, and flows, which supported its performance.
Our exposure to systematic macro strategies contributed minimally in 2024. Market dynamics shifted direction multiple times, especially in October, as the approach to the U.S. elections created heightened volatility. These shifts erased most of the gains accumulated during the first half of the year. Similarly, our balanced portfolio allocation had a neutral impact, as rising real rates detracted from performance, and holdings in equities, yen, and gold were insufficient to offset these losses.
Our allocation to Event Driven strategies, initiated mid-2024, produced positive results, though slightly below expectations for the year. Despite this, we remain optimistic about the asset class given the anticipated increase in M&A transactions and restructurings in 2025, which we believe will create significant opportunities going forward.
Looking Ahead
As we enter 2025, we are optimistic about the opportunities in a portfolio designed to have minimal exposure to broad market factors. This approach is particularly advantageous given the current environment of elevated equity valuations, limited room for rate cuts amid rising inflation, and high levels of uncertainty. Not only does this reduce the portfolio’s risk in volatile markets, but it also positions us to benefit from market rotations and shifts in leadership, which are well-suited to non-directional strategies.
One area of focus is Event Driven strategies, which delivered as expected in 2024 but now present an even broader opportunity set. Last June, we initiated an allocation to a European-focused Event Driven strategy, benefiting from increased transaction activity, though the sector returned only 3.74% in 2024 (HFRX Event Driven Index). Looking ahead, we expect M&A volumes to rise, not only in Europe but also in the U.S. To capitalize on this, we are expanding our exposure by adding a dedicated U.S. Event Driven strategy. Additionally, we are diversifying beyond M&A to include opportunities in restructurings and divestments, which we anticipate will increase in 2025.
We are also positive on macro strategies, given the potential for significant market movements driven by policy changes, particularly in the dynamic between China and the United States. Rather than taking directional bets, our approach combines systematic strategies, which can capture momentum from these movements, with discretionary strategies that are value-sensitive and can protect against market reversals. This mix provides robust diversification and complements the broader portfolio.
Our equity market neutral exposure remains a key area of strength, as we continue to observe extreme valuation disparities (e.g., U.S. vs. the rest of the world, Growth vs. Value, the "Magnificent 10" vs. the broader market, and Large Cap vs. Small Cap). Additionally, low average correlations among individual stocks create fertile ground for these strategies. Our three equity market neutral strategies are geographically complementary, highly diversified, and well-positioned to generate strong positive contributions.
Finally, we have taken steps to increase portfolio diversification, adding a new strategy to bring the total to eight. This reflects both the expanded opportunity set and our commitment to prudent diversification in a year that could be marked by significant volatility.
Important Disclaimer: This information is solely intended for the use of professional clients only. It is not for general public distribution. This is a summary of some of the key features of the Farview Alpha Multi-Strategy Fund. Prospective investors should read the applicable offering memorandum, articles of association or other constitutional document and the applicable subscription agreement relating to the purchase of shares or interests in such Fund. This document provides a general overview of strategies proposed by Farview Investimentos (“Farview”) (references to “this document” in this Important Information section shall include this presentation document and any associated documentation, including cover email or cover letter documentation, delivered with it). This document is qualified in its entirety by reference to the applicable offering memorandum, articles of association or other constitutional document and the applicable subscription agreement relating to the purchase of shares or interests in such Fund. Recipients should form their own assessment and take independent professional advice on the merits of investment and the legal, regulatory, tax and investment consequences and risks of so doing. In preparing this document, Farview has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise used in the preparation of this document. Farview, and any Fund, accept no responsibility to any person for the consequences of any person placing reliance on the content of this document for any purpose. Neither Farview nor any Fund is under any obligation to update the information contained in this document. Past performance information contained in this document is not an indication of future performance. This document has not been audited or verified by an independent party and should not be seen as any indication of returns which might be received by investors in any Fund. Where projections, forecasts, targeted or illustrative returns or related statements or expressions of opinion are given (“Forward Looking Information”) they should not be regarded by any recipient of this document as a guarantee, prediction or definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. A number of factors, in addition to any risk factors stated in this document, could cause actual results to differ materially from those in any Forward Looking Information. There can be no assurance that any Fund’s investment strategy or objective will be achieved or that investors will receive a return of the amount invested.
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