Crescat Global Macro commentary for the first quarter ended May 31, 2016.

May preliminary performance estimates and two high conviction investment ideas in our Global Macro Fund are presented below.

We are pleased to announce that the Crescat Global Macro was again ranked in the Top 10 in the Past Three Years category through Q1 2016 by BarclayHedge. The annualized return of the Crescat Global Macro fund was 12.1% over this period, while the HFN Macro Index returned 1.9% over the same time-frame. This is the sixth time since inception that the fund has earned this three-year award substantiating the long term strength of the firm’s investment discipline.

May month-end and YTD net performance estimates are below:

May 2016 Month-End Net Estimates

Crescat Global Macro: -0.3%
Crescat Equity Long/Short: 0.0%
Crescat Large Cap: -0.9%
S&P 500: +1.8%

2016 YTD Net Estimates (through 05/31/2016)

Crescat Global Macro: +2.1%
Crescat Equity Long/Short: +2.6%
Crescat Large Cap: +6.5%
S&P 500: +3.6%

China Currency and Credit Bubble remains one of our highest conviction themes. Our largest short currency position in the Global Macro Fund is the Chinese yuan. The People’s Bank of China has injected over $1.3 trillion of cash into the Chinese markets this year through the repo market. For perspective, this intervention (net of foreign reserve changes) is approximately $3.6 trillion annualized, a full third of China’s GDP! This value is by far the largest major central bank stimulus in history. The investment implications surrounding our China Currency and Credit Bubble theme are profound and Crescat intends to capitalize on them.

Crescat Global Macro

Within our New Oil and Gas Resources theme, we see evidence across a variety of fundamental factors in favor of a bull run in natural gas. Production in key basins is rolling over, exports via pipeline and LNG are ramping up, and coal plant retirements are continuing. Furthermore, the amount of natural gas in storage is currently very high relative to the past five years’ average, as seen on the graph below. As inventories grow, so does bearish sentiment, and prices tend to over-adjust to the downside as they did in 2012. We see a similar inventory setup as 2012, and when combined with slowing production and increasing demand, there is a strong setup for natural gas.

Crescat Global Macro

Crescat Global Macro Fund – Macro Themes

In May, six of our macro themes had positive profit attribution in the Crescat Global Macro Fund. Performance was most negatively impacted in the month by a correction in precious metals prices. Our Global Fiat Debasement theme remains one of our highest conviction themes and applies to all three strategies. It is our best performing theme year to date. We remain bullish on precious metals due to the high amount of global quantitative easing and debt-to-GDP. We also remain relatively bullish on the U.S. dollar versus other fiat currencies as the prospects for another Fed rate hike have increased. As such, we are short seven foreign currencies in our Global Macro Fund versus the dollar. These dollar longs also serve as hedges against our long precious metals positions. As an illustration of this hedge, these currency shorts had a net positive profit attribution in May in the Global Macro Fund while our precious metals longs were down. Be sure to read more about this and our other macro themes in our upcoming Q2 Investor Letter.

Our investment team is working hard to deliver the performance Crescat is known for. As always, our motivation is to provide the best possible tools and resources to help our clients realize their objectives. We’re committed to putting our clients first, delivering the consistency, trust, and discipline that Crescat Capital is known for. Thank you for your continued support and confidence in Crescat.

Sincerely,

Crescat Capital