2019 December CAD
1.39%
MTD
2.76%
YTD
Monthly Performance (net of all fees)
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 1.72 | 1.79 | 3.13 | 1.15 | 1.35 | -0.75 | -1.54 | -1.34 | 0.04 | -1.45 | -2.57 | 1.39 | 2.76% |
| 2018 | 6.36 | 4.81 | 0.95 | 0.71 | -0.85 | -1.07 | 2.50 | 1.69 | 3.53 | 0.67 | 0.02 | -0.18 | 20.58% |
| 2017 | 0.27 | 0.05 | 0.35 | 0.25 | 1.39 | 1.45 | 1.77 | 0.12 | 3.27 | 3.61 | 13.96 | 1.96 | 31.51% |
| 2016 | 1.59 | 3.30 | 1.53 | -0.82 | 5.67% |
Risk vs. Return Comparisons Across Indexes
| Month Return | YTD Return | Volatility | Sharpe | Sortino | Beta | Best Month | Worst Month | Annualized | |
|---|---|---|---|---|---|---|---|---|---|
| Caravel | 1.39% | 2.76% | 9.46% | 1.6 | 6.52 | 1.00 | 13.96% | -2.57% | 17.69% |
| S&P 500 | 3.01% | 31.47% | 11.7% | 1.11 | 1.3 | 0.07 | 8.01% | -9.03% | 14.93% | S&P/TSX | 0.45% | 22.59% | 8.68% | 0.73 | 0.9 | -0.09 | 8.74% | -6.27% | 7.92% |
Dear Partners,
For the month of December, The Caravel Capital Fund Ltd appreciated 1.39% bringing the total return for 2019 to 2.76%.
In December we were pleased to see two overdue merger arbitrage deals close. One deal was repriced and cost us over 2% in 2019 and another had been delayed by three months causing a large portion of the profit to be consumed by stock borrow fees. The long-short gold portfolio contributed gains to the fund as it was able to generate alpha returns for the month of December. We adhered to our model by increasing our hedge to 100% after the gold portfolio rose above our statistical target. Some of these profits were offset as the fund took conservative write-downs on two bond positions we are holding in our distressed portfolio.
Following the beating we experienced over the prior six months, we were far more gun shy in December than we would typically be. As a result, we held a much smaller short position in a hostile takeover that we
had believed was going to fail. We had in fact pre-counted the votes leaving us high conviction the deal would be voted down and ultimately it was causing the stock to trade lower. We stayed true to one of our golden rules of investing: “Analyze, Invest, Advertise” by sharing our thesis with a number of other hedge fund managers who ultimately took positions on the short side. When the deal broke the shares fell 25%, and the fund was able to cover generating a substantial return on the capital deployed. Watching the deal blow up despite a smaller short allocation than normal was like a twenty-play scoring drive against the 49’ers defense. We needed that win to remind us that sh*t happens you can’t let it rattle you and yes – you have to be committed, get back up, and keep going with confidence.
We are hard at work in January, already investing in two new deals, however we are holding almost 30% of the capital in cash, which is frustrating. We are remaining patient and we know this will pay off. We are currently negotiating with two merchant banks on what may be 20% plus return opportunities if we can get them. We will keep you updated.
We thank you for your continued confidence and capital and look forward to a better year.
Sincerely,
Caravel Capital