01/
Alternative strategies continued to add value in our Multi-Strategy portfolios during the third quarter of 2025. Our 40/30/30 portfolio construction framework continues to demonstrate the role of uncorrelated return streams despite solid returns in traditional markets.
02/
Our positioning remains unchanged from last quarter, we have maintained a lower equity beta and remain neutral fixed income exposure (within a 40/30/30 framework) as markets grapple with latent inflation, valuation risk, and macro uncertainty.
03/
Most central banks’ targets of 2% are looking increasingly unrealistic and concerns over the sustainability of government debt loads are emerging. As a result, market-based measures of inflation such as breakevens and forward-looking expectations have also been firming. We believe inflation protection should be a key component of the 30% Alternatives portion of most investor’s portfolios.
During the third quarter, equity markets continued to push higher given signs of recovery in economic growth. To the extent our economic cycle models picked up similar signals, we note that there are often “head fakes” in reaching exit velocity, especially with a stagflation narrative continuing to persist. Benchmark bond yields (i.e. U.S. 10-Year Treasury) were largely on a downward trajectory in the period, affirming the stagnant growth narrative as investors focus on challenging dynamics in the U.S. labour market. Ongoing geopolitical uncertainty remains an overhang and we continue to highlight the need for flexible strategies, including those less-dependent on the level and direction of traditional markets.
As we look ahead to the second half of 2025, we remain defensively positioned:
Equities: Maintain an underweight in North American developed market equities, having down-shifted beta exposure earlier in the year via either directly lowering long only equity exposure or rotating long-short equity allocations into market neutral allocations. Continue to believe Emerging Markets show interesting opportunities with supportive monetary and fiscal policy conditions.
Fixed Income: Having moved to neutral from underweight in the Q2 update, we maintain that from a total return perspective, fixed income may be a better risk/reward setup than equities at this juncture. A resurgence in inflation remains a lingering risk, but at a neutral stance in the 40/30/30 framework, fixed income is also below traditional 60/40 portfolio benchmarks, plus we maintain a dedicated overweight to inflation-linked returns within the 30% allocation to alternatives. Structurally, we also remain wary of the trend in supply of U.S. treasuries amid deficit-spending and the drift away from Zero Interest Rate Policy (ZIRP) in Japan.
Alternatives: Continue to be our highest-conviction area. Diversifiers and inflation-oriented strategies remain overweight and are expected to benefit in navigating geopolitically volatile and policy-sensitive regimes.
We continue to emphasize alternatives as key diversifiers. Within our Inflation strategy, Precious Metals have trended higher and the strategy has maintained full position weight for most of 2025. The “debasement trade”, in which long term investors migrate away from traditional developed market government bond holdings and into hard assets, has resulted in near-historic price moves higher across most precious metals. Across other commodity groups, such as Energy and Industrial Metals, price movements have been oscillating and range bound, resulting in some confusion in trend signals. These range-bound moves are perhaps the precursor to larger trends once economic data moves decisively towards reacceleration or not. Industrial Metals are at the confluence of different forces such as the underlying economic data as well as potential participation in the debasement trade mentioned above. The inflation strategy continues to mirror underlying dynamics in the inflation markets and therefore aligns with the investment objectives of the strategy.
We have remained underweight within equities with a focus to ex-North American markets. Beta exposure has been reduced, and we’ve tilted more heavily toward market neutral equity strategies that we believe are better positioned to benefit from heightened dispersion and potentially volatile market directionality.
Within fixed income, we continue to monitor inflation concerns and tight credit spreads, but remain neutral to a 30% strategic allocation in the asset class. With latent inflation impulses and rate volatility becoming a larger concern, we view high-quality active fixed income strategies as somewhat attractive for navigating interest rate risk. We remain wary of long-only credit exposure given the ongoing tightness of credit spreads and believe investors focused purely on yield-seeking should seek diversification via quality active managers in the credit space.
We view portfolio hedges in both the equity and credit space are attractive.
Alternatives were again the most resilient component of portfolios across multi-strategy mandates in the third quarter, particularly diversifiers which focused on uncorrelated returns. Alpha strategies as well as Quantitative Factor strategies continued to add value in the quarter, diversifying returns from traditional asset class risks. Returns in our Inflation strategy continues to be driven by Precious Metals and while we await broader commodity participation in latent inflation impulses, the strategy has also benefitted from gains in industrial metals and energy commodity baskets.
Despite the continuing surge in AI-related stocks, our broader multi-strategy mandates saw continued contribution from Emerging Market and non-U.S. equities. Having dialed down equity beta via long-short equity and market neutral equity strategies, the volatility benefits weave nicely with the focus on diversification in these mandates.
As of September 30, 2025 (%) | 1M | 3M | 6M | 1YR | 3YR* | 5YR* | Since Inception* | Inception Date |
PICTON Balanced Fund (F) | 3.06 | 4.57 | 10.42 | 14.75 | 13.79 | 8.96 | 8.17 | (2015-10-29) |
PICTON Multi-Strategy Alternative Fund (F) | 3.23 | 5.26 | 8.55 | 11.53 | 10.48 | 7.87 | 6.28 | (2018-09-27) |
PICTON Inflation Opportunities Alternative Fund (F) | 2.26 | 3.79 | 4.53 | 7.18 | – | — | 6.54 | (2023-05-04) |
(*) Annualized performance.
Source: Picton Mahoney Asset Management
This material has been published by Picton Mahoney Asset Management (“PMAM”) as at October 15, 2025. It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
This material may contain “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs of PMAM as of the date they are made. PMAM assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements, as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.
Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Alternative mutual funds can only be purchased through a registered dealer and are available only in those jurisdictions where they may be lawfully offered for sale.
There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.
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