After a very successful 2008, last year proved to be a much more challenging trading environment for the trend following community.
At AHL, we gave back a small part of our 2009 financial year gains in the course of the FY 2010. Early in the 2009 financial year a number of strong trends developed, most notably the rise in oil prices to over $140 per barrel and the subsequent steep fall, but a lack of clear trends in FY 2010 made trading difficult. At 31 March 2010, AHL was 12.9% below its high watermark for earning performance fee income.
Trading conditions were particulary difficult in the bond sector, with energy and agricultural markets also generating losses. Despite the broadly unfavourable market environment in 2009, AHL did find opportunities within equities, interest rate and credit markets which helped offset some of the losses incurred from other sectors.
Negative performance is always disappointing. However, given the volatility level targeted by AHL, it is to be expected that drawdowns like that of 2009 will be encountered at times.
The magnitude of last year's losses is commensurate with the types of drawdowns AHL has experienced in the past and is also well within statistical expectations.
We encourage investors to look at AHL as at least a three to five year investment, over which time frame managed futures has consistently delivered superior, uncorrelated returns compared to traditional equity classes. The two-year period which encompasses the credit crisis is a case in point. Over 2008 and 2009, AHL Diversified plc returned +10.7%, compared to –22.0% for the MSCI World Stocks Index. The ability to generate a positive return during one of the greatest financial crises in over 50 years reinforces the diversification benefits AHL offers to investors.
