DAte
Jun 20, 2025
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5 min
You see, May marked the anniversary of our strategy and our plan to open a level of investment management to mid-sized Dutch investors that previously was reserved only for institutions. For too long sellers of ETFs, such as BlackRock, have convinced mid-sized investors that the market can’t be beaten and that you should just do “time in the market”, accept drawdowns and whatever the market presents to you. As a small Amsterdam-based contender, we show that it can be done, and you don't need to burn millions of dollars a year to get there.
I ended the last monthly on a positive note. NINA’s view on interest rate sensitive sectors, US stocks and investment appetite were improving. Mid-April we started buying more and more in these sectors, certain high beta companies, and reduced safe asset exposures. In the 2nd half of April we saw volatility in the market coming down as investors started to adjust to the long-term plan of president Trump (lower USD, lower rates, friendshoring / reshoring of vital supply chains, more Bessent, less Navarro, etc.) and the style of dealmaking. This paid out very well both in our USD and EUR performance.
Since May 2024 we have done 36.55% in USD, which is more than double the market returns, and 27.9% in EUR, which is almost 3 times what the market offered. To be sure this is better than our objectives, as I don't expect us to always shoot the lights out on a one-year horizon. Our objective is to have a scalable strategy towards the Bln AUM, with which we shoot the lights out on a ~5 year horizon. Having said that, I very much enjoy seeing these results!
April:
But let's for a second go back to the 8th of April. Since liberation day I was receiving emails and calls from potential partners and investors that were in wait-and-see mode. These calls were wonderful. I was able to tell them how we were doing and I felt some joy knowing our strategy, on that day, was 20% ahead of the market. It was a great turning point for us and gave us traction.
But what I learnt over the years is that it is exactly when you are feeling the best about your results that things are about to change. I also knew something was coming, because many sectoral and single company signals were turning positive because of various behavioral contra indicators in the bond markets.
I told one of my partners that we were going to increase certain positions and something was about to happen from here. Sure enough the day ended with a positive move in US equities of more than 10%. After such a move, our risk engine cuts capital across most positions, even if the fundamental outlook had improved for many of our companies based on their macro assessment. Below we depict the daily progress of Argan versus the market in US Dollars.
After that it was a matter of buying into high returning positions as realized vol subdued. As always I spent some time looking inside NINA, and seeing which data was behind the positive changes. Bear in mind, we have a large set of models with signals that then get aggregated up so the checks are automated and I read a report on: the inputs, when the data is updated, the raw numbers, what it means for the signals and so on. This is to make sure I understand why NINA is saying what it is saying. If there is nothing that goes against my intuition on the process, note NOT my feelings about the market, I follow the process.
And while it felt uncomfortable getting into the positions we got into, given the amount of uncertainty at the time, I was able to draw from lessons from similar situations, such as the crash during COVID-19. Outperforming the market is rarely comfortable.
There was a piece of research we performed at my previous job, the family office of a prominent European Family with a multi-billion AUM, that helped me through this time. The family office had a really smart principal with a keen eye on data and one of the key things we looked at was the discrepancy between hard and soft data.
In 2023 we saw a discrepancy between soft data (e.g. surveys from consumers sentiment and economic outlook of businesses) and hard data (actual realized data such as sales figures). This is something to watch, as given economic impulses either soft data moves towards hard data or the other way around. The transmission mechanism is very complex and not well predicted. But the most important takeaway is not to panic when soft data falls off the cliff, which NINA knows. As in 2023, mid-April many market participants were not convinced that one should add on equity risk in the portfolio. And like 2023, relying on sentiment and narrative would have been a bad call.
May:
Then came May, which was a rather uncomplicated month. By the beginning of May the dust had settled and our risk engine allowed almost all of the positions to come to fruition. In fact the macro picture for many companies in our portfolio started improving significantly on the back of improving macroeconomic fundamentals. The labor market remained robust, retail sales kept its strength, price pressures (even though backward looking) were still fine, and indeed the soft data moved back towards the hard ones.
The housing sector however continued to show weakness. A piece of soft data showing this is the NAHB/Wells Fargo Housing Market Index (HMI). To directly quote: “Each month, the HMI depicts overall builder sentiment toward housing market conditions on a scale ranging between 0 and 100. A higher reading (>50) is an indication that the majority of builders feel confident about the current and near-term outlook for housing. Lower readings signify less optimism among builders.”
We also saw a sharp decline in the Cleveland Fed New Tenant Rent Index before. The housing sector is a key factor that NINA, our system, monitors meticulously.
Performance:
Since inception performance is holding up very well and we are continuously improving our investment process. But, the most important thing is that the performance turns out exactly as we would expect. That is, an equities first product, with a macro system steering the positions in our portfolio companies, providing high returns in bullish times, and low volatility during dire economic times. All that without shorting. To be sure, we also expect our system to be wrong at times, as long as it performs in line with our expectations I am very happy.
Looking forward:
As I am writing this, the world seems to be on the verge of yet another military escalation with the Israel-Iran conflict. Oil prices surged more than we have witnessed in the last couple of years. As the consensus on the probability that the US will be directly involved in the war increases, the upside risk to crude oil rises.
A rule of thumb often cited by Fed officials is that a 20 percent unexpected rise in crude oil typically yields a 10 percent jump in gasoline prices, which pushes headline CPI up by about 0.3 percentage points within a month.
Looking at futures pricing it seems that the market is placing a low probability on the possibility of severe escalation, one that threatens bottlenecks such as the often cited strait of Hormuz. And then we can see Brent crude oil jump to >100 $/Bbl.
We will then be looking at an exogenous stagflationary shock, adding to the already stagflationary expectations in the US. This week the FED moved down their growth forecast, moved up their Core PCE forecast and the divergence in the path of future interest rates further increased.
Moreover, The One Big Beautiful Bill Act does not seem to present the bond markets with a clear path towards budget deficit normalization. An exogenous shock to energy prices will further aggravate the situation. That is, a rise in inflation expectations and inflation term premia means investors will demand a higher yield on their Treasury bonds.
A rough estimation states that each 10 basis point rise from the baseline in the 10-year US Treasury rate results in roughly more than $30 billion net interest cost increase. This is a dangerous development as the cycle can feed on itself.
Looking at the data coming in over the week, we saw some clearly worsening hard prints. From a growth perspective we saw weaker retail sales and industrial production in the US, and housing data is further weakening. In terms of the inflation data last week, while the top-line numbers all looked fantastic, we did see rising price pressures in those sectors of the CPI that are most exposed to Chinese trading. Many of our single company macro signals are worsening and the top numbers are also deteriorating. It might be the case that this time, the hard data will slowly converge to the problematic soft numbers we saw in April.
Argan.ai:
There are some really exciting developments at argan.ai.
Last couple of weeks, we announced the expansion of our team on LinkedIn:
We wrote a piece on hedge fund returns. You can read that here. And, we started recording weekly macro-updates, you can find the video of week 24 here, and week 25 here.
Make sure to follow us for, among others, our weekly macro update: Follow argan.ai on LinkedIn
