In July, I started posting quarterly results of our two key strategies, Hedged Growth and Absolute Return, and I will continue to do so every quarter for those who may be interested.
Here are charts since inception of Hedged Growth (HG) and Absolute Return (AR). The charts are through September 30.
Hedged Growth
click on chart for sharper image
Hedged Growth Description
Hedged Growth is a long-short equity strategy, primarily domestic, that is always 1/3 long and 1/3 short. The remaining 1/3 is either cash or long, based on a variety of technical and fundamental factors.
Hedged Growth was fully hedged (1/3 long, 1/3 short, 1/3 cash) from August of 2007 until late March. At that time we went long (2/3 long, 1/3 short) for a period of about 6 weeks. In early May we returned to a fully hedged stance and have remained fully hedged ever since. This can change at any time, and without warning.
Our performance comes from the ability to pick decent longs vs. decent shorts regardless of which direction the stock market is headed. We do not disclose specific short positions.
For more details please see The Hedged Growth Portfolio Overview.
Absolute Return
Absolute Return Description
Absolute Return is a flexible wealth management strategy that can take positions in foreign and domestic stocks, energy trusts, gold, silver, treasuries, and currencies.
All of the preceding are by equity positions in individual stocks or various ETFs.
For more details please see The Absolute Return Portfolio Overview.
Quarterly Synopsis
September was the most difficult month in the markets we have witnessed for a very long time. The equity markets declined over 9% for the month, commodities continued their slide, and the economy weakened substantially. However, those events alone were not what made the market environment difficult.
What made September difficult, more so for Absolute Return than Hedged Growth, was the rapid switch between orderly conditions early in the month, to the largest string of government interventions since the Great Depression. Such massive intervention along with market participant concern over those events is destabilizing in and of itself, and many of the most consistent inter-market relationships broke down in September.
For example, relationships between gold and gold miners, stocks and treasuries, and treasuries and TIPs all broke down. There were violent swings in both the equity market and the currency markets, and the swings in foreign equities were even greater. Gold had its largest single day gain in its history, however the $HUI continually underperformed. The record daily market swings, in both directions, made it difficult to evaluate the market�s response to the government's actions.
In response we have lightened up our equity allocations, instead keeping the Absolute Return portfolio primarily in cash, foreign currency, treasuries, and gold.
In contrast, Hedged Growth had gains in August and September, and continues unscathed into October in spite of massive swings of 10% or so in the market.
Year To Date Comparisons Through Q3
Hedged Growth +12.7%
Absolute Return -0.9%
S&P 500 -20.7%
HFRX Global Hedge Fund Index -11.6%
MSCI World (ex USA) Stock Index -28.9%
For additional comparisons please see the Bloomberg article Hedge Funds Concede Errors, Profess Optimism After Worst Losses.
For the year, we are pleased to be +12.7% and nearly flat in our two key strategies in light of overall market conditions. That performance was without leverage at any time, and frequently holding high cash positions.
We are actively seeking institutional clients, fund managers, and financial planners who may be interested in our strategies. Those open to pursuing a relationship with Sitka Pacific Capital Management please Email Mish or click the contact button at the top of this page.
Disclaimer
The investment choices and services in this document are provided as general information only and are not intended to provide investment or other advice. This material is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any security, financial product or instrument or to participate in any particular trading strategy. Not all securities, products or services described are available in all countries, and nothing in this
document constitutes an offer or solicitation of these securities, products or services in any jurisdiction where their offer or sale is not qualified or exempt from registration or otherwise legally permissible.
Although this material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
The fact that Sitka Pacific Capital Management has made the investment choices and services provided herein available to the reader does not constitute a representation that any product described herein is suitable or appropriate for the reader.
Many of the products described herein involve significant risks and the reader should not enter into any transactions unless the reader has fully understood all such risks and has independently determined that such transactions are appropriate for the reader. The reader should not construe any of the material contained herein as business, financial, investment, hedging, trading, legal, regulatory, tax or accounting advice and the reader should not act on any information in this service without consulting its business advisor, attorney and tax and accounting advisors concerning any contemplated transactions.
Past results are not necessarily indicative of future results. Historically broadly diversified portfolios have all produced gains and losses due to changes within the equity, interest rate, credit and currency markets. Additionally, gains and losses are impacted to varying degrees by investment acumen, public and private market volatility, corporate activity, securities selections, regulatory oversight, trading volume, money flows and governmental policies. These elements and/or their rate of change may not be present in the future, and thus future performance may be impacted.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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