Eclectica January Performance Update
The latest from Hugh Hendry: key holdings EUR/LVL pair, USD/GBP pair, Bund and OZ notes, MetroPCS bonds, and a bunch of tobacco equity position.
Key points from the letter:
In a volatile and ultimately difficult month for global equity markets, the Fund returned a profit of 1.2%.
As the market got off to a strong start we took the opportunity to reduce our equity exposure, particularly in the agricultural and mining sectors. With these areas up around 7% in the opening week of January the Fund was able to lock in profits enabling the equity book to contribute almost 1% for the month.
Clearly the portfolio was conservatively positioned for the month. Long equity holdings constituted just 25% of NAV and this was dominated by defensive, high yielding sectors such as tobacco, pharmaceuticals, utilities and telecoms. The Fund also allocated 30bps to Eurostoxx 50 put options providing a 3% delta’d short position, which yielded 20bps profit for the month.
In fixed income the Fund’s 15% weighting in government bonds, split equally between Australian 10yr and German 30yr, contributed 38bps. This was marginally offset by a 9bp loss on the Fund’s 5% of NAV holdings in corporate debt.
In commodities the Fund has a 2% exposure to corn, which cost the Fund 28bps.
The Fund also made 10bps from its currency positions with profits in a 2% of NAV long US Dollar/short Hungarian Forint position and a 1% long Sterling short/New Zealand Dollar position. During the month the Fund added a 20% position long Euro/short Latvian Lat, which is currently a pegged exchange rate.
Going into February the Fund has increased its government bond exposure with an additional 7.5% points in the German 30yr Bund. The Fund has also added to the currency holdings with a 3% long US Dollar/short South African Rand position.
The current portfolio is 25% of NAV long equity, 1.5% short equity (via Eurostoxx put options), 24% government bonds, 4.5% corporate bonds, 1.8% commodities and 29% currency.
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