RBF UCITS Monthly - March 2017

• Fed hiked rates by 25bps to 0.75-1%
• China data remains supportive of growth momentum
• Fund’s USD I Class gained 0.43% in March
• Sovereign and quasi-sovereign issues from the Middle East outperformed
• Added a number of new issues including Oman and Kuwait government

A mixed month saw the yield on the 10-year US Treasury spike as high as 2.627% during March, eventually closing marginally lower over the month at 2.388%; as Trump-euphoria began to wane. The President abandoned the health care bill vote, thus expectations for future reform - such as the deployment of fiscal spending and the overhaul to the tax bill - hung in the balance. Softer US sentiment saw the dollar continue its retreat through the month, falling 0.76%. Meanwhile, as was widely expected, and priced in, the FOMC hiked the Fed’s funds target rate by 25bps mid-month to 0.75-1%; the futures market ended the month pricing a 56.7% chance of a further hike in June this year.

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RBF UCITS Monthly - February 2017

• Positive month for bonds; Fund’s USD I Class gained 0.96%
• Stronger data and Fed speaker comments shift market expectations to a March rate hike
• Credit markets well supported and new issuance was readily absorbed
• US dollar strengthens on a trade weighted basis;
• Fund’s 100% CNH overlay has gained 1.79% year-to-date against the strong US dollar

February was a positive month for asset markets: equity markets such as the S&P 500 reached new highs as data releases buoyed optimism about an improving growth outlook. Accompanying this, market expectations for a US rate rise shifted forward so that by month end the Fed Futures were discounting ~80 percent chance of a rate hike in March having been closer to 30 percent earlier in the month. This reflected a slew of generally strong data releases, Janet Yellen’s testimony to US congress and commentary from Fed officials. Later in the month, William Dudley, a known ‘dove’ and voter on the FOMC, stated ‘the case for monetary policy tightening has become a lot more compelling’. In spite of this, the yield on the 10 year US Treasury compressed 6 basis points to end the month at 2.39% and the yield curve flattened; we see the Fed as acting ahead of the curve and expect the yield curve to continue to flatten. The US dollar index gained 1.62% over the month helped by the stronger data and mounting expectations for a rate rise.

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RBF UCITS Monthly - January 2017

• Offshore renminbi (CNH) appreciated 2.17% against the dollar
• The Fund’s USD I Class gained 4.10% in January.
• China data releases indicate economic stabilisation
• Largest contributors to performance were holdings in Middle East and CNH overlay
• The more dovish Fed is on hold given the uncertainty of the new US presidential administration

A broadly positive month for risk assets saw the offshore renminbi appreciate 2.17% against the dollar, and 2.79% on a total return basis. Last month President Xi Jinping took centre stage at the World Economic Forum in Davos, the first for any Chinese leader. High up on his agenda was the importance of economic globalisation and free trade; in the face of less trade-friendly US rhetoric. Jinping also echoed what Chinese policymakers have reiterated time and time again, that it is not their wish to devalue the renminbi to make exports more competitive. Instead their intention is to manage the redback against the recently expanded CFETS currency basket; of which the dollar is a large component. With non-manufacturing activities making up over half China’s GDP, coupled with the efforts to reform the country’s economy to more sustainable, consumer-led growth it would be counterintuitive to devalue the renminbi.

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RBF UCITS Monthly - December 2016

• Fed raises rates by 25bp to 0.75%, and forecasts three rate hikes in 2017
• Trump rally sees the dollar hit all-time highs; renminbi remains stable against CFETS basket
• China data surprises on the upside, economy is stabilising
• Russian quasi-sovereign holdings outperform
• A cloud of political uncertainty lies ahead

Markets ended on a more positive note last month, but the year closed with a dark cloud of political uncertainty hanging over Brexit and the Trump administration. As we had expected, the Fed raised rates by 25bps to 0.75% and pencilled in an additional hike in 2017; taking it to three forecasted hikes. The Treasury market swung around in December, with the yield on the benchmark 10-year peaking as high as 2.60% post-Fed announcement, finally closing at 2.45%. The dollar also gathered pace, hitting an all-time high ahead of the month-end; the DXY Index closed 0.7% higher on the month.

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RBF UCITS Monthly - November 2016

• A tumultuous month across asset markets resulting from the unexpected US Election outcome
• Renminbi remains relatively resilient against the stronger dollar, versus other major currencies
• Global bond yields reprice as growth and inflation expectations are revised
• China’s PMIs indicate increased economic confidence and stability
• The Fund’s USD I Class fell 5.80% in Novemberbut remains up 0.92% YTD

A tumultuous month saw Donald Trump's unexpected win push befuddled financial asset markets to extremes. Hypersensitive markets saw the dollar’s 3.1% (DXY Index) gain pretty much wipe out most emerging market currencies over the month; after the US presidential election result was announced. The only emerging market currencies to have actually remained resilient against the dollar’s onslaught were the Taiwanese dollar, Russian rouble and the Chinese renminbi. The Turkish lira took the hardest beating, falling over 9%. Comparatively the rate was down 1.65% over the month, and has continued to strengthen against its anchor, the CFETS basket of currencies.

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RBF UCITS Monthly - October 2016

• China’s economic data releases surprise on the upside
• “Hard Brexit” concerns dominated markets through October
• Possible Fed hike in December coupled with ECB QE tightening concerns and revised inflation expectations saw global financial assets sell-off
• Renminbi added to IMF SDR basket; PBoC continue to maintain currency stability against CFETS basket

China’s data releases for September surprised on the upside; retail sales and industrial production were in-line with expectations and CPI beat the market consensus at 1.9%yoy with PPI bouncing into positive territory. The Q3’16 GDP reading matched market expectations at an annualised 6.7%yoy, unchanged from the previous quarter and on track to meet the government’s 6.5-7% target. The services sector once again expanded at a faster rate than the rest of the economy, contributing over 50% to growth. The Purchasing Managers releases for October remained supportive with the official manufacturing print bouncing to a 26 month high and in-line with the private Caixin reading, at 51.2. New orders, employment and raw materials all increased; this has seen some market makers bearish on China rethinking their forecasts and strategies. The non-manufacturing reading also surprised at 51.2, bouncing 1.1 points.

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RBF UCITS Monthly - September 2016

•The Fed held rates leaving door open for a December hike
• BoJ moved to steepen the JGB curve
• OPEC production cut “agreement”; oil rallied
• Russian quasi-sovereign bonds outperform
• Global growth momentum is slowing; could be time to deploy fiscal tools

September witnessed a rollercoaster month as asset markets were once again on tenterhooks, awaiting central bank monetary policy announcements; particularly from the BoJ and Fed. As we had expected the BoJ moved to steepen the JGB curve, by launching 'QQE with Yield Curve Control', or Quantitative and Qualitative Monetary Easing with 10-year yield cap at 0%, and the Fed maintained the status quo; leaving a hike in December on the table. The futures market appeared confused with all the mixed FOMC member rhetoric throughout the month, finally ending the month pricing in a 59.3% chance of a hike in December. The Fed’s median forward guidance was revised down to two rate rises, from three, in 2017.

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RBF UCITS Monthly - August 2016

• Fed chatter sees market odds for next hike revised to December
• Another positive month; Fund’s USD I Class gained 1.00%
• Russia and Middle East quasi-sovereign holdings outperformed
• We look to maintain a bias in the long-end with a high weighting in US Treasuries


In another relatively quiet August, market focus remained on central bank moves. Increasingly hawkish Fed rhetoric saw 10-year US Treasuries rise 12bps off the previous month’s lows, to 1.58%. Most Fed members, including the known doves, appeared to reprice the market’s odds for a hike in December this year, from March 2017; the dollar gained momentum in the second half of the month, up ~0.5% (DXY Index). Meanwhile the BoE delivered a 25bps rate cut, expanded its QE program and introduced a Term Funding Scheme.

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RBF UCITS Monthly - July 2016

• Central banks thrown off by Brexit aftershock
• Q2’16 US growth weaker-than-expected
• Fund’s USD I Class gained 2.09% in July
• Offshore renminbi gained 0.67% against dollar

The Brexit effect rippled through markets last month throwing central banks into defensive mode; the US Fed held rates and the BoJ doubled its ETF buying programme in addition to the surprise JPY28tn (~5% of GDP) fiscal stimulus package. As default UK Prime Minister Theresa May readied her cabinet to prepare for “Brexit means Brexit”, the BoE also kept rates on hold at 50bps catching some market observers off-guard as consensus was for a 25bp cut*. The BoE clearly indicated that it will take action at the next meeting in August, no doubt armed with more post-referendum data releases to support the decision. The pound stabilised somewhat in July, helped by a weaker dollar resulting from the worse-than-expected Q2’16 US GDP reading, which also saw US Treasuries rally into month-end; the 10-year benchmark closed at 1.45%. The IMF once again revised global growth estimates lower, to 3.1% citing Brexit’s “sizeable increase to uncertainty”.

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RBF UCITS Monthly - June 2016

• UK EU Referendum dictated market sentiment, UK votes to leave EU; UK is downgraded
• Rollercoaster month across asset classes; safe-haven bond yields plummeted
• Influential central banks on hold; futures pricing in next Fed fund rate hike in 2018
• Fund’s USD I Class gains 2.02% in June
• Renewed global growth concerns

The UK EU Referendum in/out opinion polls shook markets all about last month; 51.9% of the British public voted to leave the EU, the consequent damage to market sentiment was extremely visible. Having soared to yearly highs ahead of the referendum results (as the remain camp appeared to take lead), the pound plummeted, trading at its weakest level since 1985 and finished 8.5% lower on the month; the worst performing currency against the dollar. Both S and P and Fitch downgraded the UK’s credit rating to AA and Moody’s put its Aa1 rating on negative watch.

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RBF UCITS Monthly - May 2016

•   Brent crude gains ~3% on the month
•   Fed rhetoric turns hawkish; members state 2-3 rate hikes possible this year
•   China data indicates stability
•   US Treasuries and Russian quasi-sovereign holdings remain supportive

Asset markets were very mixed in May. FOMC rhetoric switched midway through the month, erring on the hawkish side and Brent breached the $50 level during the final week, gaining 3.24% over the month. The yield on the 10-year US Treasury was pretty much unchanged, closing at 1.85%, while the 2-year fell 10 basis points (bps) to 0.784%, after some Fed members commented on the prospect of 2-3 rate hikes this year, starting as early as June.

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RBF UCITS Monthly - April 2016

  • Fed’s dovish tone and weaker US data saw further dollar weakness
  • Pick-up in China data tempers Fed’s global economic & financial development concerns
  • The Fund’s USD I Class gained +0.52%
  • Holdings in the Middle East and Russia performed well

The risk-on sentiment broadly continued in April although performance was somewhat tempered as market activity was once again dictated by central bank action and crude prices. We had the BoJ wrong-foot some investors by leaving its three key easing tools unchanged. The bank's inaction saw the yen continue its upward assault against the dollar, gaining ~5.6% over the month. Meanwhile, the Fed unsurprisingly left the funds rate unchanged, although it sounded slightly more upbeat about the risks of global economic and financial developments; after the recent pickup in economic data out of China. The broadly dovish tone saw the dollar weakness continue for the third consecutive month. Meanwhile, having surged to 1.93% ahead of the meeting, the yield on the 10-yr US Treasury closed at 1.83%; only 6bps higher.

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RBF UCITS Monthly - March 2016

  • The Fund’s USD I Class was up +4.39% in March and +6.15% in Q1’16
  • Risk-on rally across asset classes. Brent crude up 10%
  • The offshore renminbi appreciated 1.37% against the dollar
  • Holdings in Russian quasi-sovereign and China issue outperformed

After what was a very volatile start to the year, March ended the quarter with a risk-on rebound as the ECB delivered further easing (in excess of market expectations) and Fed members revised their dots lower. Commodities witnessed the largest rally; Brent crude surged over 10% over the month helped by rumours of a Saudi-Russia led supply freeze. The Fund’s USD I Class was up +4.39% over the month and +6.15% during the first quarter.

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RBF UCITS Monthly - February 2016

         • US data releases were patchy; weak inflation concerns deepen
         • Yields on JGBs up to 10-years fall below 0%
         • Fund’s USD I Class up +2.71%; renminbi gains 0.61% against the dollar
         • Middle East holdings outperform

February offered some much needed respite from the extreme volatility witnessed in January.
Data releases out of the US remained patchy at best; the US ISM, one of the inputs into our
global growth model, showed worrying signs for global growth. The US labour market
continued to show strength and despite the rally at the end of the month, oil and the rest of
the commodity complex remained under pressure; heightening subdued inflation fears. The
yield on the benchmark US Treasury 10-year fell 19 basis points to 1.74%.

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RBF UCITS Monthly - January 2016

  • Global recession fears deepen
  • ECB signal further easing, dovish Fed hold rates and BoJ adopt negative rates
  • Emerging markets enjoyed a risk-on rally at the end of the month
  • Rotated out of Asian outperformers into defensive government bonds

Markets started the year in the same vain they had left off in 2015. As concerns over recessionary fears deepened; market sentiment was extremely fragile. US and China data did little to support markets and the risk-off tone saw a further plunge in the commodity space, with other markets following suit. That was until Mario Draghi’s signal of further ECB easing and the Fed’s rate hold, rounded off nicely with the BoJ’s surprise negative interest rate announcement. Markets reacted positively to the central bank policy decisions and emerging market bonds enjoyed the risk-on rally into month-end.

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RBF UCITS Monthly - December 2015

  • As expected the Fed raised rates by 25bps; any further tightening to be gradual
  • Treasury yield curve flattened and investment grade credit spreads widened
  • Oil hit an 11 year low and the high yield sector remained under pressure
  • Downside global growth risks; we expect fewer rate hikes than the Fed forecast

December witnessed a further rocky month, in what was a volatile year across markets, as concerns over global growth deepened. The Fed finally delivered a 25bps rate increase; markets were relatively unchanged and the news well absorbed by emerging markets. Geopolitics and the steep fall in commodities however weighed on market sentiment; Brent crude fell 16.4% to 11-year lows after OPEC agreed to keep taps running. Currencies also came under pressure in December, this was also a theme through the year as the dollar appreciated 9.3% (DXY Index). The yield on the ten-year US Treasury rose six bps to 2.27%.

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RBF UCITS Monthly - November 2015

  • The Fund’s USD I Class is up 4.44% year to date
  • US data still mixed; but FOMC set to hike rates in December
  • Chinese renminbi granted reserve currency status
  • Russian bonds continue their strong run

A tricky month for most asset classes: commodities plummeted further and currencies struggled as the dollar rallied to year highs. Geopolitics and the attack in Paris did not help market sentiment last month, however, relations between Russia and the West thawed somewhat over military cooperation against Islamic State. Elsewhere the Fed’s tone turned more hawkish through the month.

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RBF UCITS Monthly - October 2015

  • Fed hold off from raising rates; lift-off in December remains “live”
  • Renminbi appreciates against the strong dollar; onshore +0.64%, offshore +0.61%
  • Fund’s USD class gained +2.59%
  • Broadly positive performance across all holdings; Russia quasi-sovereign issues outperform
  • IMF to decide renminbi SDR inclusion by the end of November

Market focus once again remained on the Fed rate decision and softening economic growth in China. The month started with a disappointing US non-farm payroll reading which dampened expectations for an October rate lift-off. Further mixed data out of the US did little to convince the market otherwise and as the futures market had predicted, the Fed held off from raising rates at the October meeting. Having fallen as low as 1.97%, off the back of soft retail sales data the benchmark ten-year US Treasury yield ended up 11 basis points on the month at 2.14%, as the market was spooked by the Fed’s more hawkish comments that a December rate hike is firmly in play.

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RBF UCITS Monthly - September 2015

  • Fund’s USD I Class gained 2.41%
  • Another volatile month for risk assets; weakening EM backdrop thus US rate debacle
  • Further soft data out of China; authorities will remain accommodative
  • Renminbi, one of the few currencies to appreciate against the dollar
  • Holdings in Russia outperformed

Another volatile month across risk assets saw equities continued their slide and safe-haven US Treasuries rally into the end of the month; the yield on the ten-year benchmark fell 18 basis points to 2.04%. The weakening emerging market backdrop, and thus the Fed’s hold on rates did little to help market sentiment.

US data releases remained mixed. Key economic indicators disappointed such as retail sales and the Chicago Fed National Activity index, which fell to -0.41 in August. September’s preliminary reading for University of Michigan sentiment came in way below expectations as did the Empire manufacturing print. However, new home sales beat expectations and the revised Q2 GDP reading came out at annualised 3.9%, versus market calls for 3.7% growth. Although unemployment has fallen to an “equilibrium” level, the Fed’s “dual-mandate”, which weighs up price stability and maximum employment when conducting monetary policy, is being skewed by subdued inflation. With global economic pressures and uncertainties troubling financial markets and the Fed, the central bank did not move to raise rates in September. Despite a more dovish tone at the September meeting, some Fed members maintain that “lift-off”  before the end of the year is still “live”.

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RBF UCITS Monthly - August 2015

  • Global growth concerns, economic softness in China and timing of US rate hike led to a volatile month
  • China modified the renminbi fixing mechanism to a more market driven methodology
  • US economy showing signs of recovery, but inflation remains lackluster
  • September “lift-off” remains “live”, but futures market pricing in only 38% chance
  • China has the firepower to boost its economy

Global growth concerns, perceived economic weakness in China and the timing of the first US rate rise all took market focus in what was a very volatile August. Equity markets sold-off sharply during the month, the S&P index fell -6.3%, into negative territory year to date and the Vix (volatility) Index ended the month at 28.43, having spiked as high as 53.29 intra-day on China’s “Black Monday”; which saw global equities nosedive. Commodities continued their rout, but rebounded in the final days of the month. Having dipped as low as $42.23, Brent crude had a last minute rebound in the final three days of trading - off the news that supply had actually fallen in June, from April's peak - crude gained 3.7% on the month, however, we expect global demand to remain suppressed going forward. All of the above sent shivers through emerging markets with many currencies falling sharply; the Turkish lira, for example, fell 5.2%. The yield on the ten-year US Treasury was pretty flat over the month at 2.22%, however, it did swing about somewhat during the month, falling as low as 1.9% intraday on Black Monday.

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