Portfolio Manager Update | HESPER FUND - Global Solutions
HESPER FUND – Global Solutions (*)
Key points at a glance
- Donald Trump’s policy shift is disrupting global economic dynamics and reshaping the post-war geopolitical order
- The prospect of Trump’s trade mayhem has raised growth concerns and drove gold price to a record
- Germany has broken the “shackles” to spend more on defence and infrastructure
- Russia’s attack on Ukraine shows no signs of slowing down
- The HESPER FUND – Global Solutions fell 0.32% in March as stocks plunged and European government bond yields rose. Year to date performance has slowed to 0.10%
- The HESPER FUND erased the dollar exposure and was short on the US equity markets
Tariff angst roils markets
HESPER FUND – Global Solutions Macro scenario: countdown to reciprocal tariffs
31/03/25 – Gold rallied to a record as trade war fears and the prospect of much slower global growth drove safe-haven demand. Trump continues to shake the foundations of the dollar as the world’s global currency. He is upending trade with tariffs and verbal attacks on both friends and foes, and weakening commitments to NATO. Trump’s economic advisers spoke of an unlikely Mar-a-Lago Accord to weaken the US Dollar and reshape global finance.
US consumer sentiment has fallen to its lowest level since 2022, as uncertainty about inflation and the employment outlook weighs on US households. US trade tariffs and an escalation of the trade war could well lead to sticky inflation and weak growth. For now, it looks like self-inflicted pain.
Germany threw off decades of fiscal prudence to revive its economy and rebuild its military, triggering a broad repricing of European assets.
Deglobalisation, trade wars and a weakening US commitment to NATO should prompt leaders to challenge other taboos that have held the EU back. It is time for the EU to respond with decisive and assertive policies, but this is no easy task given the diversity of EU national interests and fragmented domestic agendas.
Monthly performance and current positioning
The HESPER FUND – Global Solutions (T-6 EUR) fell 0.33% in March as stocks corrected and currency volatility increased. Total assets fell to 51.8 million EUR. Volatility over the past 250 days fell to 5.8%. The annualised return since inception decelerated to 3.18%.
During the month, Hesper increased the duration to 4 years as signs of a waning optimism in the US continued to emerge. Due to dented credibility, the fund erased its dollar exposure to 0%** and reduced its overall equity exposure to 15% with a completely different composition (short Nasdaq and long European indices).
Performance in March (-0.32%) was as follows: +0.14% fixed income instruments, -0.47% equity futures, +0.43% commodities, -0.32% currencies and -0.10% fees and expenses.
Outlook: eroding confidence in the US’ economy and leadership
The aggressive economic and geopolitical policy shift in the US will have a significant impact on the global outlook to 2025 and beyond. Global activity is slowing and is seriously challenged by policy uncertainty, trade conflicts and geopolitical confrontations. Monetary easing and expansive fiscal policies will continue to support economic expansion to a certain extent, but downside risks have increased significantly.
Amid market turmoil as Trump tears up the economic playbook that has underpinned US prosperity for generations, some European policymaking elite sense an opportunity for their currency to come of age as part of a broader resurgence. However, the dollar is the world’s primary reserve currency and US Treasuries are considered risk-free assets. In recent weeks and months, however, President Donald Trump’s desire to rework trading relationships, hobble the economy with tariffs and reduce international dependence on the dollar has made both domestic and international investors wary. And while the dollar may be weakening and making US markets less attractive, it still has no rival as the world’s primary reserve currency.
*HESPER FUND - Global Solutions is currently only authorised for distribution in Germany, Luxembourg, Belgium, Italy, France, Austria and Switzerland.
** It excludes an arbitrage in the forward market between the US dollar and the Hong Kong dollar. This transaction artificially elevates the overall exposure to the dollar to 89%, where it would otherwise be 0%.
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