O’Connor Global Multi-Strategy Alpha Monthly Letter

With various elections taking place, 2024 was set to be an eventful year. Looking at the price action post Indian, South African and Mexican elections, we have seen how elections can bring volatility and opportunity. This is even before mentioning the turmoil surrounding President Macron’s surprise decision to announce parliamentary elections in France, which sent French sovereign bond spreads to multi-year highs relative to German sovereign bonds.

We have also seen various negative datapoints coming from US consumer and short-cycle industrials, which are raising questions about how long the current economic cycle will remain. However, despite the negative data points, GDP growth estimates have yet to be downgraded - see figure 2 for G10 2024 GDP forecasts. Inflation prints have begun to come in lower than expectations, and central banks remain reasonably accommodative. At the same time, multi-year themes around areas like artificial intelligence (AI), data centers and accelerating power demand continue to provide structural tailwinds for segments of the economy.

Portfolio Update

We continue to observe the best alpha performance from our international equity long/short exposures, where we seek to focus our ideas in less crowded spaces and where bottom-up fundamentals continue to dominate macro factors. We are seeing global equities dominated by ongoing inflows into Tech – as shown in figure 3 – which may present more relative value opportunities in the coming months. Within Merger Arb, we are seeing spreads remain relatively wide, but at levels we view as attractive when considering expectations of a more catalyst driven second half-year and ongoing new deal announcements building the pipeline. Credit has been less eventful compared to equities, particularly from a relative value perspective. Nevertheless, we are staying patient ahead of potential dislocations or volatility in the coming months and are looking for issuance to pick up again after the summer.

We remain focused on differentiating ourselves through our bottom-up relative value and structural alpha focus, less crowded asset mix, idiosyncratic nature of returns, transparency across investment teams and dynamic portfolio adjustments. On the team front, besides the addition of the Commodities and EM ex-Asia teams mentioned last month, we are pleased to have added talented analysts to drive our efforts in the US technology and European consumer discretionary sectors. We are pleased with the progress we have made on the hiring front this year and are already seeing significant collaboration across teams with new investment colleagues. We will look to spend more time integrating all of our recent hires in the coming months.

With a keen focus on performance, innovation and client satisfaction, we stand ready to navigate the complexities of today’s markets while looking to find new opportunities for success.