October saw a sharp reversal from the previous month as well as longer-term trends.  Liquidity, momentum, and the residual volatility factors outperformed and size underperformed, which was the opposite of September.  Real estate and financials were negative after having been market leaders in the previous month.

This whipsaw market action led to negative alpha in October.  This is typical at the beginning of a reversal move, but we expect to recoup this alpha in the coming months when either the emerging trends continue or they mean-revert.  The index futures premium narrowed during the month, which led to our onshore market neutral strategy to outperform.

We have seen materially higher interest in China’s equity markets since the stimulus announcement in September.  The better liquidity in the market should lead to a more favorable environment for our strategy in the coming quarters.