Macquarie Professional Series Glb Alts (MAQ7578AU) Report & Performance

The Fund returned -2.16%, net of fees, in January 2023. Risk sentiment headed in a positive direction to start off 2023, with markets placing more weight on a scenario where the US Federal Reserve navigates inflationary pressures with minimal further rate hikes while also avoiding recession. As a result, equity markets rallied, with the MSCI World Index returning +7.1% in US dollar terms.

• In a difficult month for the strategy, the largest detractors from an underlying fund perspective were the P/E Global FX Alpha Fund, which delivers the strategy’s dynamic currency allocation, contributing –1.1% to the Fund, and the PGIM Wadhwani Keynes Systematic Absolute Return Fund, whose exposure is non-trend signals (such as macro, value and carry), contributing -0.5%.

• From a sector perspective, P/E’s contrarian currency positioning, long the Australian dollar and euro against the US dollar, generated losses. P/E noted that long euro and short US dollar positions have become crowded to extremes, and that they are forecasting a rebound in the US dollar over the next few months. Offsetting this was P/E’s long gold position, which is assessed using currency factors. In fixed income, a key driver of 2022’s profits in addition to currencies, the positioning of PGIM detracted, with PGIM expecting higher official interest rates than markets had priced in. From FORT and Winton’s perspective, uptrends in government bond yields continued to unwind and short positions in German government bonds detracted. In equities, PGIM’s short directional positions detracted, as they were expecting weaker earnings growth outcomes than the consensus. Winton’s long positions in stock indices were a bright spot as the recovery in global stock markets that began in October resumed in January. Helping further to offset losses were Allspring’s cash equities’ gains.

• Beyond performance, the portfolio managers executed the announced transition replacing FORT’s 20% trend allocation with the Winton Trend Fund.

• The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.

• The Fund returned -1.40%, net of fees, in December 2022. Risk markets declined in December, with, for example, the MSCI World Index falling -4.0% in US dollar terms, following a hawkish message delivered by the US Federal Reserve, which pointed to a scenario of persistent inflation and continued tightening in the short to medium term.

• The best performing underlying fund was the FORT Global Trend Fund, whose exposure is price-based momentum, returning +2.0% and contributing +0.4% to the Fund. The largest detractor was the P/E Global FX Alpha Fund, which delivers the strategy’s dynamic currency allocation, returning -5.3% and contributing -1.5% to the Fund.

• From a sector perspective, FORT’s fixed income positioning was the predominant contributor to the Fund. Gains in bonds were driven by short positions in Europe, where short exposure increased throughout the month. Short positions in the UK also contributed, while short positions in North America detracted. In interest rates, all regions contributed positively, primarily driven by short positions in Europe. In currencies, P/E’s short Japanese yen position detracted notably as the Bank of Japan made a surprising announcement to widen the band on its Yield Curve Control policy, which fuelled investor expectations of greater moves in the future. P/E see the past two months of currency movements as driven primarily by changes in speculative positions rather than material changes in fundamental factors, such as relative growth expectations, which have remained broadly unchanged.

• Elsewhere, whilst gains were made in PGIM Wadhwani’s directional equity positions across both developed and emerging markets (but most notably in North America), these were offset by FORT’s equity positions, whose trend strategy entered the month long North America (only flipping to short during the last trading week). Allspring’s cash equity positions also detracted, giving back some of the strong gains seen over the past two months.

• The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.

• The Fund returned -2.60%, net of fees, in November 2022. Risk markets responded positively to lower-than-expected US inflation numbers and China relaxing Covid-19 restrictions, with the MSCI World Index rising +7.0% in US dollar terms.

• The best performing underlying fund was the Allspring Global Long/Short Equity Fund, which seeks to exploit equity market inefficiencies through fundamental factor exposures, returning +6.9% and contributing +1.6% to the Fund. The largest detractor was the P/E Global FX Alpha Fund, which delivers the strategy’s dynamic currency allocation, returning -9.3% and contributing -2.6% to the Fund.

• From a sector perspective, performance was driven by Allspring, which exclusively trades cash equities, and P/E, which remains the dominant currency exposure for the Fund. In cash equities, Allspring’s positive tilts to valuation and quality factors were rewarded in adding excess returns to its risk-adjusted benchmark. In currencies, P/E noted that while speculators sold their long US dollar exposures in November, the Fund’s fundamental drivers, including stronger relative growth in North America and elevated global inflation, remained broadly unchanged.

• Elsewhere, the Fund’s distinct trend and macro managers, in FORT and PGIM Wadhwani respectively, contributed to losses as they continued to be positioned defensively ranging from short fixed income, short equity indices and long energies (which flipped to a short energies position toward the end of the month).

• Beyond performance, the Fund’s strategic weight to PGIM Wadhwani was increased from 20% to 30%, while the strategic weight to FORT was reduced to 20%. This change reflects our increased comfort in PGIM Wadhwani’s investment approach and its ability to navigate both up and down markets. We believe PGIM Wadhwani has the ability to adapt quicker to changes in market conditions, relative to trend following managers such as FORT that need more price evidence to change directional positions and thus are more susceptible to getting caught out at market inflection points. The relatively higher adaptive nature of PGIM Wadhwani is also considered a positive given the current volatility in markets.

• The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.

The Fund returned 0.51%, net of fees, in October 2022. In contrast to September where the MSCI World Index declined -9.3% in USD terms, global equity sentiment was more positive in October, with the MSCI World Index rising +7.2% in USD terms. Pleasingly for the Fund, positive returns were delivered in both months despite extreme swings in equity markets.

The best performing underlying fund was the Allspring Global Long/Short Equity Fund, which seeks to exploit equity market inefficiencies through fundamental factor exposures, returning +4.5% and contributing +0.9% to the Fund. The largest detractor was the FORT Global Trend Fund, whose exposure is price-based momentum, returning -1.3% and contributing -0.4% to the Fund.

From a sector perspective, cash equity exposures from Allspring drove the Fund’s positive returns with alpha signals in value and momentum adding excess returns over its risk-adjusted benchmark. Partially offsetting cash equity absolute gains were FORT’s long energies and PGIM Wadhwani’s short equity indices exposures.

Both currencies and fixed income contributed positively alongside cash equities. Despite performance in the US dollar being mixed for the month, P/E was still able to generate positive outcomes through diversifying its long US dollar exposures to North American peers such as the Canadian dollar and Mexican peso. Short directional bond positions from FORT and PGIM Wadhwani also helped.

The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.

• The Fund returned 2.53% in September 2022, as hawkish central banks continued to respond to elevated inflation, which raised concerns of a potential recession. In contrast, global equities fell with the MSCI World Index declining -9.3% in USD terms.

• The best performing underlying fund was the P/E Global FX Alpha Fund, which delivers the strategy’s dynamic currency allocation, returning +6.8% and contributing +2.0% to the Fund. The FORT Global Trend Fund also contributed meaningfully, returning +5.7% and contributing +1.5% to the Fund. The only underlying fund detractor was the Allspring Global Long/Short Equity Fund, which seeks to exploit equity market inefficiencies through fundamental factor exposures, returning -6.9% and contributing -1.5% to the Fund. This detraction was expected given Allspring’s role in the portfolio as a defensive cash equity allocation.

• From a sector perspective, gains continued in currencies. In what has been a consistent theme throughout the year, the US dollar appreciated against most currencies as global inflation broadened beyond energy prices and into a wide variety of goods and services. In this environment, the US remains a safe-haven given its growth prospects relative to other economies across the globe.

• Contributing materially to positive returns were also FORT’s fixed income exposures. FORT’s trend signals drove short positions in both interest rates and bonds across Europe and North America, leading to further Fund gains.

• Lastly, short equity indices positions from PGIM Wadhwani contributed positively. PGIM Wadhwani were positioned for weaker than expected growth outcomes and made gains from being short NASDAQ, Canadian, Euro Stoxx and Australian markets.

• The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.

The Fund returned -0.35% in June 2022, in a month where there was large performance dispersion among the underlying funds. This dispersion was reflective of the current market environment in which central bank actions to increase rates, in an attempt to control inflation, have started to impact global growth and ultimately given rise to recession fears. • The best performing underlying fund was the P/E Global FX Alpha Fund, which delivers the strategy’s dynamic currency allocation, returning +7.8% and contributing +3.6% to the Fund. The largest detractor was the FORT Global Trend Fund, whose exposure is pricebased momentum, returning -7.4% and contributing -3.4% to the Fund.

From a sector perspective, currencies were the notable outperformer as investors and speculators preferred safe haven currencies such as the US dollar. P/E, PGIM Wadhwani and FORT each profited in the long US dollar trade from varying perspectives, ranging from relative growth expectations, analysis into US Federal Reserve behaviour and language, or reliance on technical signals.

Offsetting currencies were cash equities, where higher inflation and weaker economic activity led to a fall in these markets. Allspring’s profits arising from shorting stocks were not able to cover the losses on the long positions where the manager had a positive tilt to valuation metrics.

In equity indices, losses predominantly from FORT’s US positions (where they have remained long due to the effectiveness of longerterm equity trend models over the past decade), were neutralised by PGIM Wadhwani’s shorter-term agile positioning where they were short across a number of advanced economies including US, Canadian, Australian and European markets.

The Fund remains positioned to capitalise on persistent volatility through our high conviction process of selecting and combining active managers with differentiated styles, who are able to generate absolute returns independent of one another.