2019 January CAD

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1.72% MTD
1.72% YTD

Dear Partners,

For the month of January the Caravel Capital Fund Ltd was up 1.72%.

Coming into December, the Caravel Cad Fund was nearly 70% cash. We began adding new positions in mid-

December as the market looked for a bottom. By the middle of January, the Fund had reduced its cash position

to only 20%. Currently we are actively trading the portfolio and employing leverage when needed. The winners

for January were Merger Arb/Spinouts, and Convertible Arb. We like these kind of trades specifically for their

relative insulation from the overall market (good or bad). This is something we call ALPHA and why we get paid.

Since December we have kept a cautious eye on the rebound in North American equities. We believe the S&P 500 is trading at a full to slightly over valued level of 16.1 times forward 12-month earnings. The release of disappointing fourth quarter earnings are being overshadowed by the on again/off again US/China trade talks in addition to the relentless storm of finger pointing in Washington, Ottawa, and the UK. The politicians in all three countries seem to be oblivious to the fact that housing markets are waning in their biggest cities, GDP continues to slide lower from Q1 2018, and most concerning; earnings growth is well below the previous year’s forecast. These are not signs one wants to see at 18 times earnings, which is only 10% above the current level.

NEWS FLASH: The S&P 500 is up 9.7% in the first 44 days of 2019.

To conclude...although we feel there is marginal fundamental upside from here, we also know markets frequently exceed full value. Given this and the possibility of a trade war resolution, we don’t see a material market correction in the near term. The temptation for Joe Investor to buy a ticket on the next tall ship to overvalued land is just too great to pass up, and to that we say... step right up.

The fund remains closed to new investment. We hope to accept new capital at the end of the first quarter coinciding with the reinvestment of the Q1 performance fees. As per our policy the partners reinvested 100% of Q4 performance fees.

To our valued partners, we thank you for your confidence and capital.

Caravel Capital

Monthly Performance (net of all fees)

JanFebMarAprMayJunJulAugSepOctNovDec YTD

Risk vs. Return Comparisons Across Indexes

Month Return YTD Return Volatility Sharpe Sortino Beta Best Month Worst Month Annualized
S&P 5008.01%8.01%11.73%0.840.940.168.01%-9.03%11.69%

Growth of $1000 since inception

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