Argonaut Capital Management Group is a long term oriented, global macro fund. The fund seeks high, risk-controlled returns by investing in various currencies, commodities, credit and futures. It was founded in 1993 by David Gerstenhaber, and was one of the first tiger cubs. Tiger cubs are hedge funds started by former analysts at Julian Robertson’s Tiger Management.
The Argonaut Global macro fund was up 0.3% in February after being down 0.8% in January. Credit positions and equity indices both made positive contributions in February, while both foreign exchange and commodities had mild setbacks. For the year to date, equities and commodities have been positive performers, while credit and foreign exchange both were down.
The fund is extremely cautious about the macro environment for 2012. Gerstenhaber gives a detailed analysis of the European economy and the US economy. He expects GDP to average below 2% for 2012. Furthermore, the mixture of spending cuts and end of the Bush tax cuts could trigger “a massive fiscal contraction on the order of 3-4% of GDP” in 2013.
Gerstenhaber thinks the Euro-Zone is already in a recession, and thinks that analysts are not realistic about the depth and severity of it. With regards, to China, Gerstenhaber, notes that the economy will slow. However, equity markets could provide adequate returns, due to the under-performance of both the Hang Seng H-Shares, and Shanghai Composite over the past two years.
Gerstenhaber concludes with the following summary:
With the cumulative actions of European policymakers in the final months of 2012 significantly reducing the risk of financial disaster, we believe that the rally in risk assets that began at the start of the year will continue for some time yet. We have positioned our book accordingly, though we are mindful of the factors that could short-circuit this period of better performance and have purchased protection accordingly. As the year progresses, however, we expect that the still unaddressed endgame in Europe and serious fiscal issues in the United States will open the door to reposition our portfolio in a more bearish fashion. In particular, this should mean opportunities to position for renewed declines in the euro and European peripheral debt, along with a well-supported Treasury market. We look forward to reporting back on the evolution of our portfolio over the course of the year.