News of the Omicron Variant caused an initial shock to global financial markets in December, but markets continued their rally as investors were quick to dismiss concerns. Regarding global equity indices, the fourth quarter flipped positive after negative results in the third quarter,  the S&P 500 had strong performance relative to other global indices and small cap ended the quarter and year with a positive return. This and more in our quarterly market flash report. 

Q4 Market Update

The fourth quarter of 2021 was a mirror image of the full year in that U.S. Large Cap Growth equities led equity markets higher.  Developed non-U.S. equities were modestly positive for the quarter while Emerging Markets equities drifted lower.  Investment grade bonds were relatively flat.  Overall, diversified portfolios will have added modestly to the already strong returns in 2021.  The US dollar played a meaningful role in return dispersion across geographies for 2021, strengthening nearly 7% versus a global basket of currencies.

This is the second edition of our white paper mini-series on due diligence red flags in alternative investments. As previewed in the introductory paper, this edition will focus on the process managers use to allocate investment opportunities, i.e., how managers decide which investments go into which funds or accounts. This process, referred to as the investment allocation process, or “allocations” for short, is a critical component to the due diligence process because the interests of the manager and investors are not always aligned.  The paper’s case study will delve into BlueCrest Capital Management Limited (“BlueCrest,” “the Manager,” or “the Firm”) and the conflicts of interest that existed as a result of inadequate compliance processes governing the allocation of resources between the Firm’s flagship fund, that held external client capital, and an internal, employees and affiliates only, fund that ultimately resulted in the Firm agreeing to a $170m settlement with the SEC.