April 2024 – Teks Alpha Preliminary NAV Systema Fund

Market Overview

The stock market had a negative month in April and partially reversed the positive performance of the 1st Q (and actually of 2023). Throughout the month, the SPY posted a return of -4.17% (+6.03% YTD). Let's remember that in 2023 the total SPY return was +26.3%. On the other hand, the Nasdaq Composite performed -4.4% (+4.5% YTD and +44.7% in 2023).

There was a significant shift in market sentiment regarding the Federal Reserve’s potential actions as the probability and magnitude of rate cuts decreased. During the final quarter of 2023 and early 2024, there was strong confidence in the possibility of at least three rate cuts starting in June 2024, but we have quickly changed to expectations of one 25 bps cut (if any) by year-end. Despite ongoing messages from the Fed advocating patience and waiting for clearer signs of disinflation, several hawkish speakers and economic indicators highlighting persistent inflation raised doubts about the timing of any rate cuts. Economic data, particularly concerning inflation and overall economic performance, were the focus of the market in April. March’s Consumer Price Index (CPI) and Producer Price Index (PPI) data released in April came in hotter than anticipated, particularly in sectors like shelter and services. Although March’s Personal Consumption Expenditure (PCE) was in line with expectations, it was still viewed as too high for the Fed to consider easing monetary policy. Additionally, while March’s nonfarm payrolls and retail sales exceeded forecasts, the first-quarter Gross Domestic Product (GDP) growth was lower than projected. This combination of stubborn inflation and some weaknesses in economic growth led to discussions of “stagflation,” although we will have to wait and see if that plays out. Despite these concerns, there were some positive factors in play as we closed out the month. Corporate earnings for the first quarter generally exceeded expectations, with a higher-than-expected growth rate compared to forecasts. Large tech stocks also reported strong earnings, indicating that the secular growth theme in AI remains intact.

Furthermore, the sharp pullback in April led to oversold conditions in the market, with less than 30% of S&P 500 constituents trading above their 50-day moving average, down from 92% in Q1. Additionally, geopolitical tensions eased somewhat despite initial concerns about a potential conflict in the Middle East.

With just over 50% of S&P 500 companies reporting Q1 earnings, the results have been relatively positive. To date, 54% of companies have reported a beat on revenues, with 30% missing estimates and 16% matching. The average beat was just under 1.3%. EPS reports, on the other hand, saw companies beating nearly 81% of the time, above the 5-year average of 77% and the 10-year average of 74%.

The month of May kicks off with a Federal Reserve meeting on the 1st, at which the board is expected to keep interest rates steady at 5.25%. We also continue to have pivotal economic data throughout the month, starting with the jobs numbers and the crucial CPI report on the 15th.

\Performance

During April the Fund’s preliminary net return was +0.47% (+0.37% YTD).

Reflecting on our performance to date and enhancements made (we have backtested all of them 5 years back), we maintain our goal of a +3% net monthly return over time.

Teks Alpha Performance (%)

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD
2021 1.36 0.79 0.77 0.80 1.51 1.61 1.15 2.56 1.70 0.05 12.9
2022 -0.65 1.22 1.22 -0.10 -1.85 -5.7 2.35 -1.61 -0.5 0.33 -3.1 -0.7 -9.0
2023 3.5 0.45 1.45 2.20 5.20 -1.50 0.2 1.10 -1.50 -0.3 0.6 0.35 12.0
2024 -0.75 0.15 0.50 0.47 0.37
Performance is net of fees. Trading started on March 12, 2021. NAV is calculated quarterly by the Administrator. The next official NAV will be based in December 2023.

Teks Alpha Performance vs Benchmarks since inception (March 2021)

TEKS ALPHA SPY HFRI
Effective 15.50% 33.80% 12.49%
Annualized 5.07% 11.06% 4.08%
STD Dev 6.36% 17.39% 6.18%
Shape Ratio 0.33 0.46 0.18
Benchmarks: The HFRI Institutional Equity Hedge Index is a global, equal-weighted index of hedge funds with minimum assets under management of USD $500MM which report to the HFR Database and are open to new investments. The Equity Hedge funds that comprise the index are a subset of the HFRI Institutional Fund Weighted Composite Index. The index is rebalanced on an annual basis

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Legal Disclaimer

The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. This material is not an offer, solicitation or recommendation to purchase any cryptocurrency, security or to invest in Teks Capital or in Systema Fund PCC. Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of any market, or of any specific investment. Please remember that all investments carry some level of risk, including the potential loss of principal invested all principal. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Please remember that past performance may not be indicative of future results.