Portfolio Update
- Technical: For the first time in a long-time (i.e. well before OM added the Technical book to the portfolio), the initial sell signal was triggered for all 3 of the indices in the Technical book. This trigger indicates that the probability of a noticeable correction is elevated (i.e. 40-50% of it happening) and typically OM would reduce the position here (to c20%) but given it’s only marginally larger than the target positon and the cost of doing so, no changes were made. Should a second trigger be seen (implying a correction is likely, i.e. 67%+) then the positions will be exited.
- Equity: Given the initial sell-signal triggered in the Technical Book, OM thought this would be an opportune time to exit out of most of lower conviction equity names, comprising of DRWI and a number of the Internet positions (P, PNQI, QIWI and some of the TWTR) put on during Q2. Of the Internet positions, only VIPS and (a reduced in size) TWTR remain.
Performance Review
For the month the portfolio fell 74bps, leaving it up 5.5% YTD.
It was a very broad spread month, though unsurprisingly the losses were largely concentrated in the equity-related books. The Equity book (-283bps) was the largest negative contributor, driven by the Theravance positions (THRX and TBPH) which cost c200bps – though there was no great news, the stocks are pretty speculative. The Intenet names cost the fund about 52bps, but were strong contributors for the period they were in the portfolio. The International/Country (-120bps) also suffered from the risk-off move during the month, with the position in GREK (Long Greek equity) driving the losses. The Technical book (-20bps) also fell during the month. The Puts/Hedges (+15bps) benefited from the falling market. The Absolute/Bond Funds (-1bp) were largely unchanged and the Energy Efficiency (+10bps) names posted a small profit, after a corprate action (reverse stock split, increasing the likelihood of a full market listing) in Axion Power.
The winners were centred on the currency related books, which were driven by the strength of the US Dollar. The Currencies book (+222bps) benefited pretty evenly from the rise in the Dollar against the Euro (on hopes of a Euro-version of QE) and Japan (where bad economic news, heightened hopes of further QE). The China Thesis (+104bps) was also driven by the US Dollar exposure, and the Australian Dollar’s weakness against it.
Portfolio (as at 9/30 - all delta and leverage adjusted, as appropriate)
21.9% - Technical (DDM, SSO and QLD)
19.5% - Equities (THRX, TBPH, TWTR, TTM, RDY, & VIPS)
8.9% - International/Country (GREK & GVAL)
4.2% - Bond/Absolute Return Funds (DLTNX)
0.3% - Energy Efficiency (AXPW, and XIDE)
-1.2% - Hedges/Put Options (premium of 18bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts)
-12.4% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares)
-48.8% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)
17.2% - 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.
- Technical: For the first time in a long-time (i.e. well before OM added the Technical book to the portfolio), the initial sell signal was triggered for all 3 of the indices in the Technical book. This trigger indicates that the probability of a noticeable correction is elevated (i.e. 40-50% of it happening) and typically OM would reduce the position here (to c20%) but given it’s only marginally larger than the target positon and the cost of doing so, no changes were made. Should a second trigger be seen (implying a correction is likely, i.e. 67%+) then the positions will be exited.
- Equity: Given the initial sell-signal triggered in the Technical Book, OM thought this would be an opportune time to exit out of most of lower conviction equity names, comprising of DRWI and a number of the Internet positions (P, PNQI, QIWI and some of the TWTR) put on during Q2. Of the Internet positions, only VIPS and (a reduced in size) TWTR remain.
Performance Review
For the month the portfolio fell 74bps, leaving it up 5.5% YTD.
It was a very broad spread month, though unsurprisingly the losses were largely concentrated in the equity-related books. The Equity book (-283bps) was the largest negative contributor, driven by the Theravance positions (THRX and TBPH) which cost c200bps – though there was no great news, the stocks are pretty speculative. The Intenet names cost the fund about 52bps, but were strong contributors for the period they were in the portfolio. The International/Country (-120bps) also suffered from the risk-off move during the month, with the position in GREK (Long Greek equity) driving the losses. The Technical book (-20bps) also fell during the month. The Puts/Hedges (+15bps) benefited from the falling market. The Absolute/Bond Funds (-1bp) were largely unchanged and the Energy Efficiency (+10bps) names posted a small profit, after a corprate action (reverse stock split, increasing the likelihood of a full market listing) in Axion Power.
The winners were centred on the currency related books, which were driven by the strength of the US Dollar. The Currencies book (+222bps) benefited pretty evenly from the rise in the Dollar against the Euro (on hopes of a Euro-version of QE) and Japan (where bad economic news, heightened hopes of further QE). The China Thesis (+104bps) was also driven by the US Dollar exposure, and the Australian Dollar’s weakness against it.
Portfolio (as at 9/30 - all delta and leverage adjusted, as appropriate)
21.9% - Technical (DDM, SSO and QLD)
19.5% - Equities (THRX, TBPH, TWTR, TTM, RDY, & VIPS)
8.9% - International/Country (GREK & GVAL)
4.2% - Bond/Absolute Return Funds (DLTNX)
0.3% - Energy Efficiency (AXPW, and XIDE)
-1.2% - Hedges/Put Options (premium of 18bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts)
-12.4% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares)
-48.8% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)
17.2% - 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.
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