As stocks tumbled in January, sporting nearly around a 3% loss in the S&P 500 (.INX), Ivory Flagship Master Fund was up 1.17 percent, according to an investor letter reviewed by ValueWalk.
The fund’s net long exposure was 23.5% of the portfolio, with 90 long positions and 56 short positions. In regards to gross exposure, the fund played heavily in the mega cap sector, as stocks with a market capitalization over $25 billion represented 76.5% of the portfolio. Mid-cap stocks were the second largest gross exposure at 43.3%, followed by large cap at 35.6% and small cap with just 6.2% of gross portfolio exposure. The firm, which at one point counted assets under management north of $3 billion in 2012, currently has $1.074 billion in fund assets and $1.981 billion in total firm assets under management.
Most telling, however, was the net long exposure, explaining in part how the fund may have generated positive returns in a month when the stock market was down significantly. The fund engaged in significant relative value plays in the mega cap sector, as the net exposure was just +10.8% of the portfolio when longs and shorts were netted out. Compare this to 76.5% gross exposure. Medium cap was the second largest net long exposure at 10.8% while large and small cap stock sectors were negative net exposure.
Ivory Fund: Long information technology
In regards to long exposure, the largest net sector exposure occurred in information technology, representing 15.6% of the portfolio, consumer discretionary, representing 11% of the portfolio and industrials, representing 10.4% of the portfolio. The largest percentage of portfolio exposure occurred in individual stocks, representing 81.9% of the portfolio, while the largest net short exposure occurred in ETFs. The fund is largely invested in North America followed by much smaller exposure to Europe.
In regards to the 10 largest individual stock holdings, which comprise 31.1% of the portfolio, the fund was long Apple Inc. (NASDAQ:AAPL) to the tune of 4.7%, Compagnie de Saint Gobain SA (EPA:SGO) (OTCMKTS:CODGF) 4.4%, JPMorgan Chase & Co. (NYSE:JPM) 3.6%, Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) 2.9%, Actavis plc (NYSE:ACT) 2.7%, HD Supply Holdings Inc (NASDAQ:HDS) 2.7%, SanDisk Corporation (NASDAQ:SNDK) 2.5%, Atmel Corporation (NASDAQ:ATML) 2.4% and Osram Licht AG (ETR:OSR) (FRA:OSR) 2.3%.
How Ivory Fund hedges tail risk
A popular topic of discussion is how the fund is hedging its downside tail risk, and to this clues can be found in its broad market indices exposure. On a net basis the fund was net short broad market indices 32.9% in the portfolio, with a slight 0.5% long exposure. Based on ETF exposure statistics, one might assume the tail risk strategy is to short stock index ETFs.