4Q08 Intelledgement Macro Strategy Investment Portfolio Report - I
Posted by intelledgement on Wed, 14 Jan 09
Summary of Intelledgement’s Model Macro Strategy Investment Portfolio performance as of 31 Dec 2008:
Position = security the portfolio owns
Bought = date position acquired
Purchase Price = price per share
Shares = number of shares the portfolio owns
Cost = what portfolio paid (including commission)
Value = what it is worth as of the date of the statement (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (blank for positions new since last report)
Return on Investment = on a percentage basis, the performance of this security to date
Compounded Annual Growth Rate = annualized ROI for this position (to help compare apples to apples)
Notes: The benchmark for this account is the Greenwich Alternative Investments Global Macro Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.3%. For comparison’s sake, we also show the S&P 500 index, which historically provides a CAGR of around 10.5%. Note that dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 1% rate of interest on the listed cash balance.
Transactions: Another relatively active quarter with five transactions—three sells and one buy—plus the usual bevy of year-end dividends and capital gain distributions:
7 Oct - IFN dividend of $6.45/shr
11 Nov - Sold 489 PHO for $13.02/shr (ROI of -28.8% and CAGR of -16.7%)
19 Nov - Bought 88 SDS for $112.98/shr
16 Dec - Sold 92 SRS for $61.74/shr (ROI of -35.27% and CAGR of -27.78%)
16 Dec - Sold 97 SKF for $104.70/shr (ROI of 1.5% and CAGR of 4.9%)
22 Dec - FXI dividend of $0. 20802/shr
23 Dec - SCC dividend of $0.008631/shr and capital gains distribution of $33.91358/shr
23 Dec - SZK dividend of $0.006616/shr and capital gains distribution of $18.85726/shr
23 Dec - SDS dividend of $0.028553/shr and capital gains distribution of $11.46188/shr
Performance Review: A mediocre quarter for us, as we beat the market by a country mile, but still both lost to the macro hedgies and lost money overall. For the market, at -22.6% it was not just the worst quarter since the inception of the IMSIP two years ago, but the worst quarter since the fourth quarter of 1987—which included Black Monday—when it finished -23.3%. The S&P also recorded its worst six month period, -29.4%, since 1974 when it logged -32.4% in the second and third quarters. As for the hedge fund pros, overall 2008 was the first ever negative annual return for the industry since Greenwich Alternative Investments (GAI) began keeping track in 1988. Hedge funds overall clocked in at -15.7% for the year; macro hedge funds, however—our heros!—were the fourth-best performing class out of 18 tracked by GAI at -4.7% for 2008. Not so bad in a year when the market produced a -38.5% ROI.
Tactically, our sale of the water infrastructure ETF PHO in early November was probably a bit premature, as it could run up here on stimulus package-related “obtimism” (that is, Obama administration-related optimism that things will turn around—or, at least, a lot of money will get spent on infrastructure—under new leadership after the inauguration on 20 January). It ended the year at $14.39, so at a minimum, a little patience would have netted us a better sale price. We also should have waited on our SDS purchase in mid-November, for the same reason. Obtimism could drive the price down in the short-to-medium term; certainly the price at the end of the year, $70.94, would have been a much better entry point than the dividend-adjusted $98.10 we paid. Pursuant to our recent analysis of the performance of leveraged short ETFs, we will be looking to replace this fund with the 1x SH fund when the opportunity presents itself.
Obtimism considerations lead us to dump our reverse ETFs for the financial (SKF) and real estate (SRS) sectors in mid-December. So far, so good on this front, as both were lower at the end of the year. Sad to say, we anticipate buying back in post-20 January—once obtimism about how quickly the new administration can effect economic recovery abates—as we still expect things get worse before they get better. (As of now, there are now 1x inverse financial or real estate sector ETFs available.)
Overall for the two years we’ve been tracking the IMSIP, we are now narrowly trailing the GAI Macro Hedge Fund Index, +6% for us to +7% for them. The market overall is a very distant third at -36%.
[continued in subsequent post]