1H 2019 Overview
Dear Friends and Colleagues:
We are excited to report “top of class” Multi-Strategy Hedge Fund results for 1H 2019.
Our view of global multi-asset markets proved to be prescient through the first half of the year and we successfully capitalized on the theses discussed in Q1 2019 (Blog, Newsletter). The return attribution was diversified through a variety of low correlation allocations in an effort to decrease volatility and increase risk adjusted return.
Our most notable wins included:
- Regulated Crypto Products (including an over 10x return in a particular Bitcoin Derivative position)
- Financial sector bounce back (lead by BX, which returned over 50% in 1H 2019)
- Honorable mentions to: Value, Short, Commodities and the Cronyism bucket, for all positively contributing to YTD returns
Given the dovish pivot from the Fed Reserve President, Jerome Powell, which all but promised a rate cut at the end of July — financial markets continue to look somewhat supported and healthy. Although, as earnings season gets under way, there seems to be a moderate likelihood that the market is set to pull back as fiscal stimulus from last years tax break wears down, and central bank easing effects are bound to disappoint.
We are choosing to keep most of our positions on “tight leashes” as the business cycle stretches thinner. While we ended the 1H with more of a risk on style of positioning, we continue to lower portfolio risk and increase our cash position, while also adding hedges and more short positions. Geopolitical insights are at the forefront of our investment decision making process as we continue to evaluate investment opportunities across assets.
There was plenty of noise and intense volatility this past week in crypto with the leading executive in charge of Facebook’s Libra project in front of congress. The only *signal* in our view was when Steve Mnuchin, Secretary of Treasury and Goldman Sachs Partner drew an extremely clear line between cryptocurrency speculation and dark market illicit cryptocurrency use. As would be expected from one of the quickest to fly through the ranks at Goldman Sachs and be named a Partner — Mnuchin sided with speculators and made clear that so will the regulators. He further stated that individuals using these assets for illicit purposes will be prosecuted to the maximum extent. In our view this was a solid bullish signal as the cryptos begin their march towards regulated global adoption. However, as usual with most assets, short term price action is highly unpredictable.
Due to the immense YTD out-performance in our “regulated crypto” tactical allocation which was primarily built using derivatives — we have been forced to take some profits off the table in favor of more stable assets. With the 2018 Opportunity Zone tax credit beginning to take full form, and a sitting president 100% intent on maximizing the value of his multi billion dollar real estate empire — we view global commercial real estate and real estate investment trusts with stable yields to be attractive in the current environment even though they may face a downturn due to their cyclical nature.
We are currently evaluating mostly private side deals — both startups and real estate, in an effort to further diversify the portfolio return amongst low correlation assets. Further, after this “top tier” 1H 2019, now is as good of a time as ever to begin focusing more effort on the business development side of this operation.
THIS IS AN EXCERPT FROM THE 1H 2019 OVERVIEW which was published on 18-Jul-2019, please reach out to firstname.lastname@example.org if you would like to view full materials (for qualified accredited investors only)
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