February 2014 Review

Portfolio Update

- There were no changes to the portfolio this month.

Performance Review  

The portfolio was up 1.0% in February, as markets bounced strongly following January’s weakness, leaving it up 1.3% for the year.

With Equity markets rising strongly, the Technical Book (+86bps) was unsurprisingly one the largest contributor to performance and the Puts/Hedges (-40bps) the biggest detractor.  The NCAV book (+19bps), despite its diminutive size, was also good contributor as the lone stock within it rallied strongly on Q4 results.  The Equities book (-3bps) posted a small loss in the month, though Theravance confirmed that the company intends to split into two during the first half of this year.  The Absolute/Bonds Funds (+7bps) and Energy Efficiency (+0bps) were marginal contributors.

 

The International/Country book (+146bps), with its exposure to Greece, Spain and Italy, was the largest contributor as the European Periphery benefited from the increased risk appetite and the ETFs were also helped by their exposure to the Euro.  This strength in the Euro (against the US Dollar), coupled with strong performance from the Yen (against the dollar), saw the Currencies (-76bps) book offset most of the International/Country book’s gains.  The weakness of the US Dollar also contributed to the poor performance of the China Thesis (-35bps), as most of the negative performance came from the Australian Dollar’s rise against it.

 

Portfolio (as at 2/28 - all delta and leverage adjusted, as appropriate)   

19.9% - Technical (DDM, SSO and QLD) 

18.6% - International/Country (GREK, EWP and EWI) 
13.5% - Bond/Absolute Return Funds (DLTNX and HSTRX) 
7.7% - Equities (THRX, and DRWI)
0.7% - NCAV Equities
0.2% - Energy Efficiency (AXPW, and XIDE)   

-6.4% - Hedges/Put Options (premium of 113bps in EWZ Jan-15 puts, and 17bps in EWJ Jan-15 puts)
-13.6% - China-Related Thesis (CROC – Short Australian Dollar, partially offset by CAF – Long Chinese A-Shares) 

-49.1% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

13.0% - 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.