July Review

Performance Review
After my recent ponderings that the portfolio’s performance in the short-term was likely to be dictated the movement of Long-end Treasuries, it goes without saying that July’s performance was entirely driven by other factors.  In truth, it was a messy month that was flattered by the final performance of -0.83% (putting the YTD at +4.4%). 

The bond-orientated components of the portfolio were boosted by the strong rally in Treasuries during the final day of the month, after the initial Q2 GDP estimate came out.  The results was that the Long Treasury Bond bucket (-9bps) and the Long Bond Funds (+14bps) ended up having negligible impact on the portfolio.

The NCAV bucket was the strongest performing part of the portfolio, contributing 32bps with almost every position helped, as it benefited from the rising markets and increased risk appetite throughout the month.  The rest of the equity-orientated buckets were not so productive.  The Value Equity bucket (+52bps) was a positive contributor, though DRWI was largely flat (though that could be considered a positive development, given its travails during the month.  The Other Equity bucket (-34bips) hampered performance due to a large negative contribution from CMTL, after failing to win an army contract – unfortunately, there remains little one can do about the names in the Other-equity bucket.

The Short China thesis (-21bps) suffered as raw materials names rebounded following recent signs of growth in China steadying and as investors saw increased signs that the Chinese government would take steps to aid growth should it slow any further.  The Hedge bucket broadly suffered from the broad market rally and corresponding drop in volatility, but also directly suffered as Goldman Sachs settled the recent case brought by the SEC, helping remove some of the uncertainty surrounding the stock.

Portfolio
44.0% - Long Treasury Bonds (21.0% TLT and 23.0% in the Aug-29 Bond)
14.5% - Long Bond Funds (6.7% HSTRX, and 7.9% VBIIX)
5.1% - Value Idea Equities (3.3% THRX, and 1.8% DRWI)
3.3% - NCAV Equities
2.6% - Other Equities (1.5% NWS, 1.2% CMTL, and 0.0% SOAP)

-0.5% (delta-adjusted) - China-Related Thesis (7bps premium in FCX put, <1bps premium in EWA put)
-5.2% (delta-adjusted) - Hedges/Put Options (34bps premium in S&P put, and 35bps premium in a GS put)

29.7% - Cash