The Pivotal Point of View Commentary
• The Equity Sector Index, which houses several meaningful sub-strategies, had a difficult July overall. Healthcare generated the largest loss, down 3.3%. And within Healthcare, funds with a focus on biotech experienced even larger losses due to rate concerns, product pricing fears and a lack of M&A activity. In addition, small-cap focused managers performed significantly worse than large-cap focused peers, exemplified by the 8.8% loss in the PivotalPath Small-Cap Biotech Basket, which is down 10.8% YTD.
• In the consumer sector, July saw a reversal of the Covid-19 re-opening trade due to concerns over the spike in the Delta variant globally. In fact, our Social Distance Losers Basket generated a loss of 9.5% in July compared to a gain of 5.1% in our Social Distance Winners basket.
• Our Global Macro Index, which lost 1.2% on average, would have generated greater losses without another gain in Risk Premia. On the negative side, managers with large losses were hurt by a short squeeze in the bond market. More specifically, funds that were short bonds/long rates were caught on the wrong side of that trade.
• Lastly, the Equity Diversified Index saw significant dispersion within the sub-sectors. China managers invested in internet and education were hurt as the Asia Long Short sub-index declined 2.7%. Investors in China were reminded to take the long view.