Originally published in the Brandywine Asset Management Monthly Report.
After a solid start in October, Brandywine’s Symphony Program sold off to a slight loss at month-end. This performance continues the difficult period for the Program that began last fall. But consistent with the pattern established three months ago, gains and losses have been spread across the portfolio, as our various trading strategies continue to offset each other. This differs from the drawdown period, during which many previously uncorrelated strategies lined up to produce losses.
One thing that has been consistent throughout the drawdown and recent three months is the non-correlation of Brandywine’s returns with those of other investment managers. For example, the correlation of monthly returns of Brandywine’s Symphony Program with the BTOP 50 CTA (managed futures) index is a negative -0.04.
Brandywine is unaware of any other futures manager that has such a low correlation to other CTAs and also trades a portfolio that is broadly diversified across both markets and strategies. Usually, low correlation is achieved by trading pursuant to specialized strategies (such as short-term) or concentrating portfolios in sector-focused positions. To accomplish low correlation within a broadly diversified portfolio is unique. It is also a fundamental basis for incorporating Brandywine as a core portfolio holding. As we pointed out in our August report, despite being in our largest drawdown since inception, including Brandywine’s Symphony Program in a portfolio of CTAs both increases returns and decreases risk. The report showed the same positive benefits are also exhibited when including Brandywine in a portfolio of stocks.
But Brandywine did not launch our Symphony Program with the sole intent of providing investors with uncorrelated returns. We also, based on past performance and ongoing research, expected to earn substantial positive returns. While we were successful in accomplishing both goals over our first three years of trading, the past year – as we have pointed out in these reports – has proven to be an especially difficult period. While we can never say with certainty that a drawdown period is preparing to end (just as we were unable to foresee the drawdown beginning), we are encouraged by the more stable performance we’ve witnessed over the past few months. We encourage investors with a long-term perspective to call us to discuss how Brandywine’s unique approach can add value to your investment portfolio.