July 2013 Review

Portfolio Update 

- There were no changes to the portfolio during July.

Performance Review 

The portfolio posted a small gain of +63bps, which helped reduce the YTD loss to -122bps.

The primary driver of this month’s returns was the portfolio’s exposure to Europe.  The Euro strengthened against the US Dollar, which hurt the Currencies book (-74bps).  However, the Euro’s strength along with further signs that things aren’t getting substantially worse in Southern Europe (when expectations are very low, it doesn’t take much to surpass them) helped the positions in Greek & Spanish equities, resulting in strong performance for the Other Equities (+131bps) book.

The strong month in the markets (S&P 500 was up >5%) saw the Puts/Hedges (-34bps) lose further value, though exposure there is now very small.  With data coming out of China continuing to be very mixed, the China thesis (+30bps) saw both positions rise; the Australian Dollar weakened as the Australian economy started to see some knock-on effects of China’s slowdown, but the Chinese A-share exposure increased on the hope that the Chinese would inject liquidity into the system.  The Bond Funds (+1bps), Value Equities (+10bps), Energy Efficiency (+1bp) and NCAV (-1bps) books all had very limited impact on performance. 

Portfolio (as at 7/31 - all delta and leverage adjusted, as appropriate) 

14.0% - Other Equities (GREK, EWP and EWI)  

13.6% - Bond/Absolute Return Funds (DLTNX and HSTRX) 

9.1% - Value Idea Equities (THRX, and DRWI) 

1.0% - NCAV Equities 

0.2% - Energy Efficiency (AXPW, and XIDE) 

-0.5% - Hedges/Put Options (premium of 1bps in XLP Jan-14 puts, 16bps in XLB Jan-14 puts and 4bps in EWG Jan-14 puts) 

-14.3% - China-Related Thesis (CROC – Short Australian Dollar, partially offset by CAF – Long Chinese A-Shares) 

-30.2% - Currencies (EUO – Short Euro)

35.4% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.