IDH Capital, Cameron Dewey In der Hinterzelg 2, 8700 Küsnacht, Switzerland www.idh-capital.com Tel (+41 44)586 1577 [email protected] March 23 rd , 2017 Performance The IDH reference portfolio returned 3.8% in Swiss Francs during February, bringing the portfolio’s total return since inception to 53.8%. IDH Capital Reference Portfolio since inception in Swiss Francs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Total 2012 -0.6 % 0.8% -1.6% -0.6% 3.7% 0.8% 2.0% 1.5% 1.5% 1.9% 9.6% 9.6% 2013 3.8% -0.2% 1.0% 1.6% 3.4% -5.4% 6.7% 0.6% 3.9% 3.4% 0.8% 1.8% 23.1% 34.1% 2014 -2.4% 1.3% 1.0% -1.0% 1.3% -1.5% -0.4% 2.0% -0.4% 0.3% 5.3% 1.2% 6.7% 43.9% 2015 -8.7% 10.3% -1.2% -1.0% 1.4% -3.1% 4.9% -7.4% -0.9% 9.3% 3.8% -4.1% 1.5% 46.0% 2016 -5.4% -3.8% 2.7% -2.0% 6.5% -6.4% 6.0% 2.5% 0.4% -1.6% -1.4% 4.9% 1.3% 47.9% 2017 0.1% 3.8% 4.0% 53.8% Performance in CHF, unaudited, after taxes and transaction costs. The reference portfolio is not subject to management or performance fees. The Great Reflate Debate A year ago, investor concerns focused on the risk of global deflation. We wrote at the time of the crashing commodity super cycle and the resulting temporary drag on inflation (see our October 2015 market comment). Since mid 2016, the commodity complex, particularly oil, settled into a trading range. As the correction cycled through the data inflation picked up in the both the US and Europe, along with growth. A year on, and the dialogue has switched from deflation fears to a reflation trade fueled by Trump’s spending and deregulation policies and Draghi’s loose monetary stance. Crude oil vs US inflation, 2007-2017 Source: Tradingeconomics.com Crude oil vs EU inflation, 2007-2017 European inflation began its decline in 2012 as region’s debt crisis started to bite and troubled governments implemented sever internal devaluation policies. The strong inflation rebound at the end of 2016 raises questions about how much longer the ECB will run its quantitative easing policy.