May 2014 Review

Portfolio Update 
- Equity: The two changes to the portfolio both came in the Equity book, with OM adding to the positions in THRX and TWTR in the middle of the month.  THRX is splitting itself into 2 separate companies (a royalty management one and a pure biotech research one) in early June.  TWTR offered an interesting technical point; during May, its stock touched $29.51 putting it down around 61% from its post-IPO peak  ($74.73) in late-2013, a very similar amount to the level Facebook fell (from $45 to $17.55) post its IPO to its eventual trough in 2012.

Performance Review
May proved the first unabashedly positive month in a while for the portfolio, which rose 1.92% during the month to bring it’s YTD performance to -0.8%.

The portfolio was able to benefit from the rise of Equity markets, especially in the US, most obviously through the index-linked Technical book (+53bps).  The Equity book (+130bps) was also a strong contributor, driven by positions in THRX (+51bps), and the Internet-related positions which added +113bps (QIWI +86bps after some favorable rulings in Russia, and VIPS +33bps helped, while TWTR -36bps cost money despite rising in the latter part of the month), though this was partially offset by the position in RDY (-30bps).   European markets failed to perform as well as the US, in part due to the uncertainty in Ukraine, and the International/Country book cost -9bps.  Unsurprisingly, the Puts/Hedges book (-29bps) was a negative contributor.

The Currencies book (+34bps) performed well, driven by the Short Euro position (EUO +45bps) as speculation continued that in addition to the announced measures, the ECB would continue with further monetary easing.   

The rest of the portfolio has more limited exposure, but the books were small positive contributors; Absolute/Bond Funds (+6bps), China Thesis (+5bps) and Energy Efficiency (+1bp)

Portfolio (as at 5/31 - all delta and leverage adjusted, as appropriate) 

29.9% - Equities (THRX, PNQI, TTM, TWTR, RDY, QIWI, VIPS, P & DRWI)

21.3% - Technical (DDM, SSO and QLD)

21.2% - International/Country (GREK, EWP, EWI & GVAL)

5.8% - Bond/Absolute Return Funds (DLTNX and HSTRX)

0.2% - Energy Efficiency (AXPW, and XIDE) 
 
-2.9% - Hedges/Put Options (premium of 36bps in EWZ Jan-15 puts, and 6bps in EWJ Jan-15 puts) 
 
1.5% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 

-50.0% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

3.5% - 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.