November Review

Performance Review
November was a strange month for the portfolio, which spent the majority of the month mired in negative territory before benefiting from a mixture of the troubles surrounding Ireland and a company specific events (THRX, in the Value Equity bucket) to end up 7bips (putting the YTD at +6.97%)

The Treasury Bonds bucket was the big negative performer during the month (-69bps) as we saw continued appetite for risk for the majority of the month, before concerns about Ireland’s fiscal stability led to a late rally in yields.  The Bond Funds (-10bps) also posted a small loss, which was constrained largely due to their exposure to shorter duration instruments.  The concern surrounding Ireland’s fiscal debt situation resulted in some weakness for the Euro, something that benefited the Currency bucket (+39bps).

With the equity markets largely flat to down slightly, a number of the equity buckets failed to contribute.  The NCAV (-24bps) and Other Equity (-13bps) buckets both posted small losses, which were broadly spread amongst the underlying positions, and the neither the Puts/Hedges (-1bp) nor the China bucket (-<1bp) had much impact on the portfolio.

 The portfolio was however, pushed into positive territory by the Value Equity bucket (+83bps) but even here performance was mixed with DRWI being a slight negative contributor.  The same could not be said of THRX, which was the key to this month’s performance, adding almost 100bps after the stock rallied over 20% during the month.  The key driver came late in the month when GlaxoSmithKline (GSK) announced it would increase its stake in THRX to 19% through a private placement.

Portfolio
42.2% - Long Treasury Bonds (20.1% TLT and 22.2% in the Aug-29 Bond)
14.6% - Long Bond Funds (6.8% HSTRX, and 7.9% VBIIX)
7.7% - Value Idea Equities (5.5% THRX, and 2.2% DRWI)
4.1% - NCAV Equities
3.0% - Other Equities (1.5% NWS, 1.5% CMTL, and 0.0% SOAP)

-0.0% (delta-adjusted) - China-Related Thesis (<1bp premium in FCX put)
-2.3% (delta-adjusted) - Hedges/Put Options (1bps premium in S&P 2010 puts, 68bps premium in S&P 2011 puts and 7bps premium in a GS put)

6.3% (leverage-adjusted) – Currencies (3.2% EUO)

24.5% - Cash