The BlackRock Asset Allocation Alpha Fund posted a negative return for the second straight month, down -2.54% in April. The Fund has been hurt by the ongoing rally in global equity markets, despite the abundance of negative news still in circulation.
The most significant detractor from performance for April were the Fund's equity/cash positions (mostly short positions on US equities) and currency strategies (primarily short Australian and Canadian dollar positions, and long Euro versus Swiss franc and Turkish lira). Although there were a number of potentially negative developments during the month, including the swine flu outbreak and possible bankruptcies of US auto manufacturers, markets remained positive and continued to rally strongly.
Although the manager believes economic conditions will continue to improve, they remain bearish in their outlook. In particular the ongoing difficulties in the US housing and financial industries, and the continuing need for deleveraging, will result in lower global economic growth over the long term regardless of central bank or government actions. As a result the manager remains skeptical about the sustainability of the current rally and will adjust the Fund's portfolio accordingly.
