March was a constant bombardment of nonsense from the Commander and chief of the largest economy in the world. We often highlight the fund seeks to be market neutral in our approach however a lot of this risk is virtually impossible to hedge. In our Arbitrage book, we took the initiative to sell or simply tender a significant portion of our holdings into the acquirer’s bids which materially reduced our arbitrage exposure during the month. We also covered substantial portions of the short positions on our high hedges in our convertible positions for small gains. The relative value part of the portfolio also contributed small gains. All this and we were able to generate just under a 1% return.
Typically, volatile markets offer the fund lucrative opportunities. In this case the capricious nature of the US President and his penchant for picking fights with countries and companies has substantially elevated the risk profile in the marketplace. Boeing, Amazon, US banks, US drug companies, China, Canada, and Mexico have all been attacked with little consideration to their shareholders. With this current market we are intentionally pushing the fund to cash leaving some systematic hedges in place against our remaining positions.
We are looking hard for ideas but find the ones we love under selling pressure as investors demand higher returns while the 800 pound silverback plays with his new toys. We hope he will eventually grow tired and take a nap. Until then we will try our best to stay out of his way and seek prudent risk adjusted returns keeping in mind the increased volatility currently in the market place.
We thank you for your confidence and capital
Jeff & Glen
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