Bramshott’s Europe Fund, with $460 million in the fund strategy, delivered 2.71% to their investors February while European equities, as measured by the Stoxx 600, rose 4.81%, according to a letter to investors reviewed by ValueWalk. The hedge fund seeded by Louis Bacon of Moore Capital is having a good year compared to the broad equity indices, which are roughly flat for 2014.

After a volatile January, European stocks were positive in February as emerging markets and foreign exchange fears lessened.  With the central bank safety net in view, the letter noted that as the ECB promised action if necessary and soothing words from newly minted Fed chair Janet Yellen, outlining that tapering is not on a pre-set course and that should economic conditions, the Fed could engage in a policy change.

Emerging market fears lessen

Bramshott exposure by company

 

In terms of portfolio management, fund manager Paul Findley invested intra-month on a drawdown.  “We increased the net exposure further in early February as the market sold off on the back of renewed concerns in Emerging Markets,” the letter said. “As the market subsequently rose, the net was steadily brought back to the portfolio’s more normalized levels.”

In large cap stocks, the fund is 92.4% long and -73.2% short while the overall portfolio had 112% long exposure and -77% short exposure.   The fund’s top long sector exposure included industrials, financials, consumer cyclical, and communications.  On the short side, industrials, financials and basic materials generated the largest shorts.

Bramshott short book generated alpha

On the month both the fund’s long book and short book generated alpha, they said.  “As one might expect,  given a strong market rally, the long book drove the positive performance, outperforming the market by about 1% on a ROCE basis.” Winners in the fund’s long book came from our holdings in Essentra, OSRAM Licht, Michelin, ING and CSR, while Safran was one of the few negative long positions. 

The fund’s short book lagged the market by 1%, yet the short book had several strong positive individual contributors.  Winners for the short book included some the fund’s longer-term plays, such as select shorts in banks, software, engineering and telecoms, as profit warnings came through.  Losers on the short side included holdings in oil service and food producer names, which “bounced from oversold levels,” but the fund remains convicted to the shorts nonetheless.

Going forward the fund plans to continue with its strategy, selling into strength – particularly in steels and chemicals.  “The current results season has seen quite extraordinary levels of dispersion, witnessed in several major profit warnings from blue-chip stocks as well as significant positive moves as winners were re-rated,” the letter concluded. “This volatility and dispersion will continue to present us with good opportunities to capitalize on in both the long and short books.”