July 2014 Review

Portfolio Update 
- International/Country:  Our Man exited his positions in both Italy (EWI) and Spain (EWP) during the second half of the month.  Both had been good performers for the portfolio in the 12-18months that we held them (especially EWP, which returned 50%+), so why sell?   It’s a combination of a couple of things; from those OM speaks to, opinion on Europe seems rather uniformly positive with too many folks claiming this is the start of a new bull market (sadly, bull markets rarely ever start when everyone proclaims them to be starting, see 2009) – this combined, with the deteriorating technical of markets across Europe (not just Spain/Italy, but France and Germany too amongst others), still mixed/mediocre macro and company news, and the increased nervousness OM has over the various larger issues in the world, made it seem like a good time to step away.

- Absolute Return/Bond Funds: Our Man closed out the small position in HSTRX.

Performance Review
The portfolio fell 2.02%, leaving it at +2.2% for the year. 

However, despite the magnitude of the loss it was actually a quiet month for the book.  The Equities book (-235bps) represented the key detractor from performance, and within that book it was the position in THRX (which cost c205bps) that drove performance.  THRX gave back much of recent gains on a mixture of negative press regarding uncertainty as to the speed of take-up and potential market size of its drugs which could impact the ability of the company to maintain (and increase) the dividend, and investors exiting the name following the recent spin-off.  The rest of the Equities book was largely flat, though DRWI (-25bps) continued to struggle following the recent fundraise, while the Internet-related names added this year posted a marginal positive contribution.

As noted, the majority of the books had limited impact on the portfolio.  The Absolute Return/Bond Funds (-1bps), Puts/Hedges (-9bps), Technical (-11bps) and Energy Efficiency (-3bps) all posted small losses, which were offset by the gain in China Thesis book (+35bps, on the back of strong Chinese A-share performance).  The International/Country book (-67bps) was a noticeable detractor as European markets weakened significantly, though the exiting of the positions in Spain/Italy during the middle of the month helped constrain the impact.  The weakness in Europe also saw the Euro weaken, which drove the positive performance in the Currencies book (+89bps).

Portfolio (as at 7/31 - all delta and leverage adjusted, as appropriate) 
31.6% - Equities (THRX, TBPH, PNQI, TWTR, TTM, RDY, VIPS, QIWI, P & DRWI) 
21.2% - Technical (DDM, SSO and QLD)
10.4% - International/Country (GREK & GVAL)
4.3% - Bond/Absolute Return Funds (DLTNX and HSTRX)
0.2% - Energy Efficiency (AXPW, and XIDE) 

-0.4% - Hedges/Put Options (premium of 17bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts) 

2.0% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 

-48.9% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

14.2% - 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.