For the month of November, the fund posted a -2.57% return. As we mentioned in our previous letter, we were waiting for a stock in Australia to resume trading following the termination of a merger agreement. Substantially all conditions of the agreement were met, but at the eleventh hour the target’s auditors reversed their initial opinion with regards to the fairness of the consideration to be paid to shareholders (i.e. they decided the target was being undervalued by the terms of the agreement), causing the deal to break. Following the resumption of trading, the stock fell roughly as much as anticipated, and the fund exited the position down 1.25% as a result of the deal break. As the month progressed, we continued to reduce exposure to hedged positions that have proved too expensive to hold due to the cost of borrowing the shares we are short. This exercise cost the fund an additional 2%. On a positive note, however, our positions in convertible arbitrage, long/short equity, and a few well-timed naked shorts in deals we felt were too aggressively priced produced about 0.80% of positive return.
For Glen and I personally, this year is one that we will never forget. We have a whiteboard in our office with handwritten notes intended to help us avoid trouble. One of them is a quote by Mike Tyson: “Everyone has a plan until they get punched in the mouth”. It is a gross understatement to say we failed to anticipate certain adverse events this year and were too slow in our responses to them. Most of our investors know us well enough to know that we are fiercely competitive and believe in taking responsibility for periods of poor performance. However, we do not believe in making excuses and can only promise that we will learn from our mistakes this year.
We would like to at least provide you with some Christmas cheer. For the month of December, we are tracking up 1.5% to 1.70%. We wish all of you a very Happy Holiday and can’t wait for next year.
We thank you for your patience and apologize for treating your capital with such disrespect.
|Month Return||YTD Return||Volatility||Sharpe||Sortino||Beta||Best Month||Worst Month||Annualized|