Interim Management Statement

RNS Number : 6371R

BlueCrest AllBlue Fund Ltd

29 October 2013

 



BlueCrest AllBlue Fund Limited

Interim Management Statement

This interim management statement relates to the period from 1 July 2013 to the date of publication of this statement and has been prepared solely to provide additional information in order to meet the relevant requirement of the UK Listing Authority's Disclosure and Transparency Rules, and should not be relied on by Shareholders, or any other party, for any other purpose.

Overview

BlueCrest AllBlue Fund Limited (the "Company") is a Guernsey registered, self-managed closed-ended investment company admitted to trading on the main market of the London Stock Exchange. The Company's shares are denominated in Sterling, Euro and US Dollars. The investment objective of the Company is to seek to provide consistent long-term capital growth through an investment policy of investing substantially all of its assets in AllBlue Limited ("AllBlue") or any successor vehicle of AllBlue. AllBlue invests in a diversified portfolio of underlying funds, each of which has its own distinctive investment objective and approach, and in respect of which BlueCrest Capital Management LLP ("BlueCrest") acts as investment manager.

NAV Performance as at 30 September 2013

	Confirmed NAV 30 September 2013	QTD %	YTD %	ITD %
Sterling Share NAV	1.7751	-2.51	-0.99	81.10
Euro Share NAV	1.7115	-2.41	-1.06	74.61
US$ Share NAV	1.6966	-2.38	-0.96	73.09

Source: BlueCrest AllBlue Fund Limited

As announced on 23 October 2013, the estimated 18 October 2013 NAVs of the Sterling Shares, Euro Shares and US$ Shares were £1.8038, €1.7407 and US$1.7255, representing an increase in the period since 30 September 2013 of 1.62%, 1.71% and 1.70% respectively.

As at close of business on 28 October 2013, the Sterling Shares, Euro Shares and US$ Shares were trading at a discount to their respective NAVs of 4.92%, 3.92% and 4.67%.

Quarterly review of AllBlue as issued by BlueCrest Capital Management (UK) LLP

AllBlue Limited (Class A GBP) generated an estimated return of -0.33% for the third quarter.

Global financial markets were dominated in the third quarter by the activities of the US Federal Reserve. July and August were quieter than usual as markets anticipated the future impact of reduced stimulus, only for September's FOMC to bring a surprise decision not to taper, boosting global equities and bonds.

In Europe, better than expected Q2 GDP figures provided optimism for the start of an economic recovery after 6 quarters of contraction. However, stubbornly high unemployment remains a major headwind for growth. Political uncertainty remained high over the period as, despite a win by Chancellor Merkel in the German election, turmoil in peripheral countries increased with resignations of ministers from both the Portuguese and Italian governments risking a collapse in the ruling coalitions, leading to short-term spikes in risk levels before resolutions were agreed. The UK continued to benefit from rising economic confidence and to moderate the dampening effect of higher rates, increased in part by expectations of higher US rates. Mark Carney, the new Governor of the Bank of England, unveiled forward guidance to try to stabilise UK yields, albeit the outcome was unsuccessful as uncertainty increased and yields rose. In Asia, Japan showed the fastest growth of the major economies, with real GDP rising nearly 4% annualised, supported

by monetary and fiscal policy easing, the weaker yen, and the rise in the stock market. Investors' confidence was further increased by Prime Minister Abe succeeding in gaining a majority in parliament and Tokyo being awarded the 2020 Olympics.

Market performance over the quarter started with a continuation of bond price falls (increase in yields) across most major markets, which was reversed partially after the Federal Open Market Committee's announcement led to a mid-September rally. The net result was still negative for bond markets overall with the exception of Japan; on the quarter we saw the UK 10 year yield up 28bps, US 10 year yield up 12bps and German 10 year yield up only 5bps, whereas the Japanese 10 year yield fell by 17bps. In currencies, the US dollar fell against the UK pound and the euro as rates declined and concerns rose on the forthcoming US budget and debt ceiling deadlines. Equity markets performed well through July, levelled off in August and then rallied strongly in September after the Fed's decision; the net result for the quarter was a gain of almost 7.7% in the MSCI World, with outperformance from Europe (Eurostoxx 50 up over 11%) and solid returns from the US (S&P500 +4.7%), Japan (Nikkei +5.7%) and the UK (FTSE 100 +4.0%). Credit markets were also strong with the US and European indices seeing credit spreads reduce. Emerging markets were the main beneficiary of continued quantitative easing with a strong September rally, having incurred losses earlier in the quarter due to the expectation of the reduction in liquidity; overall Q3 returns were +5.0% for equities (MSCI EM) and +0.9% for bonds (JPMorgan EMBI). Commodities, in general, gained over the quarter. Concerns of potential military intervention in Syria helped to drive oil prices higher, but a quick political resolution calmed markets and moderated price gains, leaving WTI +7.6% over the period. In other markets, gold recovered, up 8.25%, copper +8.2% and agriculturals were mixed with a 2.5% gain in soybeans but a 13.6% fall in corn.

During the third quarter, three out of six strategies posted positive returns and contributions to AllBlue; BlueCrest Capital International, Emerging Markets and Mercantile. The strategies that posted negative returns were BlueTrend Alignment, Multi Strategy Credit and BlueMatrix. Further details on the drivers of performance for each strategy are covered below.

Over the course of the quarter the allocation to BlueMatrix was increased by approximately 4%, whilst BlueCrest Capital International and Multi Strategy Credit witnessed reductions of about 3.5% and 0.5% respectively. The allocations to other funds remained broadly unchanged.

AllBlue's VaR (95% confidence, 1 day VaR based on 3 year historical simulation) stood at 0.33% of assets as at the end of the third quarter, this was higher than the previous quarter where the VaR stood at 0.17%. Unencumbered cash levels for the underlying funds ranged from 20% for Mercantile to 90% for BlueCrest Capital International. The weighted average unencumbered cash level across the underlying funds at the end of the period was 60%.

Strategy Review by Underlying Fund

BlueCrest Capital International was up an estimated 0.80% (Class F GBP) for the third quarter. Within the Fund, the Rates strategy was the main driver of performance, benefitting from a recovery in trading conditions after the severe bond market sell-off in the second quarter. Profits were steadily accumulated in August and September, as portfolio risk levels were gradually increased as confidence and opportunities improved. The Yield Curve, Directional and

Volatility trading sub-strategies were all positive contributors, with yield curve trading providing a solid base to performance each month, whereas volatility trading contributed strongly in July and August, giving back some profits in September as volatility levels declined following relief that the Fed maintained its pace of stimulus. Directional trading was a relatively flat contributor until September when the surprise Fed decision led to a rally in bonds, benefitting our long bias in European and US rates; relative value trading strategies were a modest contributor. A small allocation to US mortgage backed bond trading strategies, focused on liquid sectors of the market, was added to the portfolio during the quarter. The remaining strategies within the fund made modest positive or negative contributions over the quarter, with no major themes driving performance.

BlueCrest Emerging Markets was up an estimated 1.12% (Class A GBP) for the third quarter. In the portfolio, all regional portfolios were profitable over the period.  CEMEA made the greatest gains, predominantly driven by Rates and Sovereign Credit trading strategies, with profitable positions including long Polish rates and Hungarian rates that benefitted from rate cuts, as well as Romanian bonds (currency hedged). The Latin American portfolio gained across the Sovereign Credit, Rates and Corporate Credit strategies, with only currency strategies detracting. Mexican rates were particularly profitable, with some profits offset by losses in Brazilian Real currency positions. Asian performance was modest, with positive returns from rates strategies being partially offset by FX strategies, including those in the Chinese Renminbi. The portfolio is now running at modest exposure levels reflecting the heightened uncertainty in markets, with a focus on high liquidity and active trading to aim to generate returns through taking appropriate risks.

BlueCrest Multi Strategy Credit was down an estimated -0.70% (Class A GBP) for the third quarter. The European portfolio led performance over the period, with gains from corporate credit index trading and index options trading being a significant driver. Tactical, relative value strategies, often with a short-term horizon, enabled a steady accumulation of profits through the quieter summer months and were well positioned to benefit from the recovery in markets in September. Convertible bond arbitrage was also profitable in Europe, as well as the US. The US portfolio underperformed with a challenging environment for the Macro Credit strategy and high yield trading. Macro Credit strategies, with a short bias to China and related markets detracted from returns as the Asian region performed strongly, rallying considerably after the Fed announced stimulus would continue unabated. US high yield strategies were also negative contributors, as fundamental long positions incurred some setbacks; however positions continue to be held for future upside. Overall the current supportive policy backdrop for credit markets and the technical demand for yield have supported a shift in the portfolio positioning from neutral to a modest long bias. However, the portfolio is actively managed and signals of higher market risk aversion will lead to repositioning to a neutral or short bias if warranted.

BlueCrest Mercantile was up an estimated 2.17% (Class A GBP) for the third quarter. The Trade Credit Opportunities and Bank Basel II sub-strategies had steady positive performance during the quarter, whilst the Commodities Finance sub-strategy had negative performance. The Trade Credit Opportunities sub-strategy continued to benefit from its defensive positioning in shorter duration assets. In addition to net positive carry, particular gains came from basis positions in Russia and active trading of specific asset positions in Kazakhstan and Turkey. The Bank Basel II sub-strategy was the best performing sub-strategy in the quarter and benefitted from net positive carry, together with net positive capital gains as asset appreciation outweighed hedge capital value changes. Hedge costs were actively managed during the quarter through index overlay on core hedge positions together with hedge rotation on a relative value basis, which contributed to the overall performance. Within the Commodities Finance sub-strategy, whilst the value of the two holdings in small cap Australian gold mining companies rallied over the quarter, this positive performance was offset by a decline in value of the Colombian gold mine.

BlueTrend Alignment was down an estimated -2.27% (Class A GBP) for the third quarter.  Performance was mixed across the sectors traded, with three out of seven sectors providing a positive return. The largest contribution came from the equity sector, where the model held a long bias and was able to benefit from the general positive trend exhibited by equity indices (for example, Nasdaq 100 was up 10.6% over the quarter). The two fixed income sectors, bonds and short term interest rates also contributed positively. Of the remaining sectors, the metal sector was the largest detractor, as market direction reversed over the quarter, gold for example rallied almost 16% through July and August before then falling back 6.5%. The Margin to Equity of the BlueTrend programme increased over the quarter from 6.4% at the end of Q2 to 14.3% at the end of Q3.

BlueMatrix was down an estimated -3.02% (Class A GBP) for the third quarter. BlueMatrix performance in Q3 occurred with a backdrop of generally rising equity markets and as in previous quarters, performance of the fund's regional strategies was not driven by the result in the underlying indices: the Asian and North American portfolios detracted from returns, while the European portfolios made positive contributions. August was the most challenging month for the model as increased cross-sectional correlations combined with low trading volumes created a poor environment for the strategy. The Asian portfolios saw positive performance from the analyst revision, price action and BlueTrend alpha signals which was offset by negative performance from signals such as value and financial statement analysis. North America was similar in that positive performance came from the analyst revision and BlueTrend alpha signals but was hurt by poor performance coming mainly from value and financial statement analysis signals. Within the European portfolios most signals generated gains with the strongest contribution coming once again from the analyst revision and BlueTrend alpha signals.

After the close of the quarter under review, ending 30 September 2013, AllBlue Limited, Class A GBP, stood at a YTD return of -0.89%, with the rolling 12 month return standing at +0.43%, delivered with an annualised volatility of 3.56%.  AllBlue continues to see mixed contributions across the underlying strategies, which in combination have led to the modest decline in NAV thus far in 2013; the strategies remain positioned to take advantage of trading opportunities that may present themselves going forward.

Capital Allocation

The capital allocation by strategy of AllBlue Limited are as follows:

	Allocation % as at 1 July 2013	Allocation % as at 1 October 2013
BlueCrest Capital International	21	18
Multi Strategy Credit	21	21
Emerging Markets	20	20
BlueTrend Alignment	17	17
Mercantile	10	9
BlueMatrix	10	14

Source of data: BlueCrest Capital Management (UK) LLP, figures to nearest 1%.

Share buy-back

As announced on 13 June 2013 the Company has extended the share buy-back engagement granting a mandate to the share buyback agent that is intended, in part, to help alleviate any significant discount pressures through the repurchase of shares on behalf of the Company. All buybacks have been at a discount to NAV and have been accretive to shareholder returns. 

From the commencement of the buy-back engagement until 28 October 2013 the Company had brought back £66.79 million through on market share repurchases of 39,559,797 Sterling Shares at an average discount to the prevailing NAV of 5.2%.  The Company currently holds 40,009,797 Sterling Shares and 4,312,539 US Dollar Shares in treasury which are available for re-sale at prices above the then prevailing NAV per share.

BlueCrest AllBlue Fund Limited Share Class	Share Price Premium/Discount to NAV as at 1 July 2013*	Share Price Premium/Discount to NAV as at 28 October 2013*
Sterling Class	-2.896%	-4.92%
Euro Class	1.18%	-3.92%
US Dollar Class	1.54%	-4.67%

*Source of data: Bloomberg

Material Events

The Company held an extraordinary general meeting of its shareholders on 16 October 2013 at which the pre-emption rights granted to shareholders under the Company's Articles of Incorporation were disapplied in relation to the issue of up to 48 million ordinary shares of any class for cash for a period concluding on 31 December 2014, unless such resolution is previously extended, renewed or revoked by the Company's shareholders in general meeting.

Disclaimer

The Company has used reasonable care to ensure that the information included in this document is accurate at the date of its issue, but does not undertake to update or revise the information, including any information relating to AllBlue Limited and its underlying funds provided by BlueCrest Capital Management (UK) LLP, or guarantee the accuracy of such information.  To the extent permitted by law neither the Company nor its directors or officers shall be liable for any loss or damage that anyone may suffer in reliance on such information. The information in this document may be changed by the Company at any time.

Past performance cannot be relied on as a guide to future performance.  The Company's investment strategy is speculative and entails substantial risks.  The value of an investment may go down as well as up and some or all of the total amount invested may be lost.

By order of the Board

BlueCrest AllBlue Fund Limited

Enquiries:

Anson Fund Managers Limited - Tel [phone]

29 October 2013

E&OE - In Transmission

END OF ANNOUNCEMENT

 

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