The Total Return Fund returned +5.0% net of fees in April, navigating one of the sharpest market reversals in recent history.
The Total Return Fund (TRF) returned +5.0% net of fees in April, versus the S&P 500 +10.5% and a 60/40 portfolio +6.2%.
Year to date, TRF has returned +5.5% net of fees, versus the S&P 500 +5.7% and a 60/40 portfolio +3.3%.
Since inception in September 2023, TRF has generated a cumulative return of +55.7% net of fees.
April delivered a powerful reversal from the volatility of March, with the S&P 500 surging to its tenth all-time high of the year in one of the sharpest recoveries in recent market history. As we noted last month, selloffs of this magnitude have historically resolved in one of two ways: a sharp snap-back to the prevailing trend, or the beginning of a more sustained move lower. This time, the market delivered an emphatic snap-back.
What makes the rally particularly remarkable is the backdrop against which it occurred. The Iran conflict remains unresolved, oil prices continue to hold above US$100 per barrel, the Strait of Hormuz remains largely closed, and bond markets continue to signal persistent inflationary pressure and elevated macroeconomic risk.
The divergence between surging equity markets and stressed fixed income markets is an unusual configuration, and one that cannot persist for an extended period without something breaking. All eyes should be on 10-year and 30-year US Treasury bonds as we head into May.
TRF’s underlying strategies are designed to generate meaningful returns in sustained trending markets, both higher and lower. Choppy environments and sharp V-shaped reversals tend to be more challenging conditions for a number of our strategies, as downside protection is our priority. That said, the Fund entered April from a significantly more defensive position and still participated meaningfully in the recovery, rotating back into equities as our systematic signals confirmed the trend reversal.
Key Contributors to Performance
Equities — The S&P 500 posted a nearly 12% rally over three weeks, marking the thirteenth largest advance of its kind on record.
Bonds — Our bond strategy shifted between long and short positioning throughout the month and continued to generate positive alpha, returning +1.1% in April. This materially outperformed a passive long position in the iShares 20+ Year Treasury Bond ETF, which declined -1.2% over the same period.
Gold — Our gold strategy held a zero allocation in April, preferring equities, as gold consolidated in a range of roughly US$4,500 to US$4,800 per ounce following its sharp move in March. This consolidation is healthy and constructive, the kind of base-building that often precedes the next leg higher. We would not be surprised to see gold push through US$5,000 per ounce if the Strait of Hormuz reopens and the inflationary impulse from oil begins to moderate.
Outlook
The S&P 500’s April performance sets up a constructive forward-looking backdrop. Since 1931, when the index has gained 5% or more in April, which has happened 17 times, the remainder of the year has historically been strong: the market was higher 88% of the time over the following eight months, with an average gain of 17%. Strength tends to build on itself.
Adding to the setup, the CBOE Volatility Index (VIX) declined more than 43% in April, the fifth largest monthly volatility collapse on record. Historically, following similar combinations of sharp equity recoveries and steep volatility declines, the forward one-year return for the S&P 500 has averaged just under 20%.
Kevin Warsh is expected to be confirmed as the next Fed Chair before the end of May. We believe he will likely advocate for lower rates, but he is still only one vote at the FOMC, and at this stage most voting members are unlikely to share that stance. The market is currently pricing roughly a 1% probability of a rate cut at the June meeting, and only 7% by year end. With the Iran conflict unresolved, it becomes increasingly difficult for the Fed to justify easing. CPI is expected to come in around 3.5% for April, and if elevated commodity prices persist, a print north of 4% for May is entirely possible.
The bond market is clearly not pricing in a clean resolution. Equity markets, on the other hand, appear to be pricing in something close to a best-case scenario: the conflict de-escalates, the Strait of Hormuz reopens, energy prices normalise, and the Fed eventually moves toward easing. If that scenario plays out, the bullish case for equities remains well supported by both strong earnings growth and continued price momentum. If it does not, and yields continue to move higher as a result of the ongoing conflict and elevated energy prices, this rebound is unlikely to be sustainable. The tension between strong equity markets and stressed fixed income markets remains the defining macro question heading into the summer.
TRF enters May with increased equity exposure and an overweight position in the Nasdaq Composite following the confirmed trend recovery, while maintaining strong diversification across non-US equities. Our gold exposure remains at zero, though certain triggers remain within close distance, and the bond strategy will continue to adapt dynamically as the interest rate backdrop evolves. As always, the process remains entirely rules-based. We follow the trends, manage the risk, and let the team of underlying strategies adapt to market moves.
Important information. This commentary is provided for informational purposes only and does not constitute investment advice, or an offer or solicitation to buy or sell any security or fund interest in any jurisdiction where such activity would be unlawful. The Total Return Fund is available to qualified and institutional investors only.
Past performance is not indicative of future results. Performance figures are stated net of fees unless otherwise noted. Any forward-looking statements reflect current views and assumptions and are subject to change; actual results may differ materially. References to specific securities, asset classes, or market levels are for illustration only and should not be taken as a recommendation. Oceancrest Capital is regulated by the Cayman Islands Monetary Authority (CIMA).
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Insights /
The April Bounce Back
The Total Return Fund returned +5.0% net of fees in April, navigating one of the sharpest market reversals in recent history.
April delivered a powerful reversal from the volatility of March, with the S&P 500 surging to its tenth all-time high of the year in one of the sharpest recoveries in recent market history. As we noted last month, selloffs of this magnitude have historically resolved in one of two ways: a sharp snap-back to the prevailing trend, or the beginning of a more sustained move lower. This time, the market delivered an emphatic snap-back.
What makes the rally particularly remarkable is the backdrop against which it occurred. The Iran conflict remains unresolved, oil prices continue to hold above US$100 per barrel, the Strait of Hormuz remains largely closed, and bond markets continue to signal persistent inflationary pressure and elevated macroeconomic risk.
The divergence between surging equity markets and stressed fixed income markets is an unusual configuration, and one that cannot persist for an extended period without something breaking. All eyes should be on 10-year and 30-year US Treasury bonds as we head into May.
TRF’s underlying strategies are designed to generate meaningful returns in sustained trending markets, both higher and lower. Choppy environments and sharp V-shaped reversals tend to be more challenging conditions for a number of our strategies, as downside protection is our priority. That said, the Fund entered April from a significantly more defensive position and still participated meaningfully in the recovery, rotating back into equities as our systematic signals confirmed the trend reversal.
Key Contributors to Performance
Outlook
The S&P 500’s April performance sets up a constructive forward-looking backdrop. Since 1931, when the index has gained 5% or more in April, which has happened 17 times, the remainder of the year has historically been strong: the market was higher 88% of the time over the following eight months, with an average gain of 17%. Strength tends to build on itself.
Adding to the setup, the CBOE Volatility Index (VIX) declined more than 43% in April, the fifth largest monthly volatility collapse on record. Historically, following similar combinations of sharp equity recoveries and steep volatility declines, the forward one-year return for the S&P 500 has averaged just under 20%.
Kevin Warsh is expected to be confirmed as the next Fed Chair before the end of May. We believe he will likely advocate for lower rates, but he is still only one vote at the FOMC, and at this stage most voting members are unlikely to share that stance. The market is currently pricing roughly a 1% probability of a rate cut at the June meeting, and only 7% by year end. With the Iran conflict unresolved, it becomes increasingly difficult for the Fed to justify easing. CPI is expected to come in around 3.5% for April, and if elevated commodity prices persist, a print north of 4% for May is entirely possible.
The bond market is clearly not pricing in a clean resolution. Equity markets, on the other hand, appear to be pricing in something close to a best-case scenario: the conflict de-escalates, the Strait of Hormuz reopens, energy prices normalise, and the Fed eventually moves toward easing. If that scenario plays out, the bullish case for equities remains well supported by both strong earnings growth and continued price momentum. If it does not, and yields continue to move higher as a result of the ongoing conflict and elevated energy prices, this rebound is unlikely to be sustainable. The tension between strong equity markets and stressed fixed income markets remains the defining macro question heading into the summer.
TRF enters May with increased equity exposure and an overweight position in the Nasdaq Composite following the confirmed trend recovery, while maintaining strong diversification across non-US equities. Our gold exposure remains at zero, though certain triggers remain within close distance, and the bond strategy will continue to adapt dynamically as the interest rate backdrop evolves. As always, the process remains entirely rules-based. We follow the trends, manage the risk, and let the team of underlying strategies adapt to market moves.
Important information. This commentary is provided for informational purposes only and does not constitute investment advice, or an offer or solicitation to buy or sell any security or fund interest in any jurisdiction where such activity would be unlawful. The Total Return Fund is available to qualified and institutional investors only.
Past performance is not indicative of future results. Performance figures are stated net of fees unless otherwise noted. Any forward-looking statements reflect current views and assumptions and are subject to change; actual results may differ materially. References to specific securities, asset classes, or market levels are for illustration only and should not be taken as a recommendation. Oceancrest Capital is regulated by the Cayman Islands Monetary Authority (CIMA).
The April Bounce Back
The Total Return Fund returned +5.0% net of fees in April, navigating one of the sharpest market reversals in recent