March 2024 – Teks Alpha Preliminary NAV Systema Fund

Market Overview

The stock market had another positive month in March. Throughout the month, the SPY posted a return of +0.4% (+10.2% YTD). This YTD figure is the best start of the year in the past five years and it had 22 record closes in the quarter.

The S&P continued its gains from February (+4.46%), January (+2.27%), December (+4.42%), and November (+8.92%) for a fifth consecutive month, resulting in a strong +21% five month rally as the economy continues to show strength and investments in AI continue to boom. Expectations that the Fed will cut rates in 2024, also influenced market performance. Companies in the S&P 500 have gained more than $9 trillion in market value since last October’s low, according to Dow Jones Market Data.

On the other hand, the Nasdaq Composite performed +0.64% (+10.93% YTD). Bitcoin and Gold, also had solid quarters, yielding +68.5% and +7.86%, respectively. The consensus soft-landing narrative shifted to a “no-landing,” mid-cycle reflation narrative, whereby profit growth is expected to justify equity prices. The recession that economists broadly feared in 2023 never showed up, but there are some concerns going forward. Interestingly enough, options (i.e. coverage for a downtrade) are not in high demand for minor corrections, but are getting more attention with regards to severe downturns. In fact, investors are concerned about a disaster, as positioning for a volatility spike increases. Average daily call volume on the CBOE Volatility Index, or the VIX, was higher in the first quarter than the two prior quarters. And its two-month skew — measuring the cost of 25-delta calls against equivalent puts — is around its highest level in five years, according to data compiled by Bloomberg.

As inflation continues to trend downward and the Federal Reserve signals its willingness to cut interest rates this year (three rate cuts are expected), rate volatility dropped to the lowest level since February 2022, creating a broadly favorable environment for stocks. However, stocks could appear overvalued if companies fail to deliver expected profits. Companies in the S&P 500 are trading around 21 times their projected earnings over the next 12 months, above the five-year average of 19, according to FactSet. Treasury yields climbed as investors recalibrated rate-cut projections. The 10-year U.S. Treasury yield—a benchmark for borrowing costs from mortgages to car loans to corporate bonds—4.192% on Thursday from 3.860% at the end of 2023.

The focus on politics will also continue to grow, as the possible Biden-Trump rematch buzz has already started to filter into the general public, even though the primaries have recently started. Typically, the Street will start to take market positions on the expected November outcome in September, as a clearer picture on not just the presidency emerges, but that of the House and Senate.

\Performance

During March the Fund’s preliminary net return was +0.5% (-0.1% 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 -0.10
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 14.85% 39.78% 12.49%
Annualized 4.99% 13.38% 4.20%
STD Dev 6.44% 17.37% 6.26%
Shape Ratio 0.31 0.60 0.19
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

Releated Articles

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.