The Global Insight Model employs a proprietary and systematic process to uncover undervalued large cap global equities. The most undervalued decile of our global large cap universe forms the focus group for our analytical team to concentrate its research efforts. The undervalued stocks from the focus group that pass our research review process become targets for our equity portfolio. Our proprietary Trapeze Ratio of Adjusted Capital (TRACTM) system is used in an effort to optimize buy and sell decisions for targets and portfolio holdings.
In addition to rigorous stock screening and research, the Global Insight Model utilizes a parallel process to monitor economic and market risk. The business cycles of all major economic regions are monitored via our Trapeze Economic Composite (TECTM) model. Market risk is monitored by our Trapeze Relative Indicator of Momentum (TRIMTM), an algorithm that combines market momentum and volatility.
Performance Disclaimer
All returns and statistics as at September 30, 2013. Returns are net of fees and commissions. The performance shown above for the Global Insight Model is for an actual representative account managed by Trapeze based on our Global Insight Model. Performance of other individual accounts may differ from these returns.
We have cited the MSCI World Total Return Index (Net), a global index, and two alternative benchmarks, the HFRX Equity Hedge Index (HFRXEH) and the HFRX EH: Fundamental Value Index (HFRXEHV), for general comparison to our performance. The HFRXEH and HFRXEHV indexes are prepared by Hedge Fund Research, Inc. The HFRXEH represents the hedge fund universe for equity hedge strategies which employ both long and short positions in primarily equity and derivative strategies. The HFRXEHV represents the hedge fund universe for fundamental value strategies which employ investment processes designed to identify attractive opportunities in securities of companies which trade at valuation metrics by which the manager determines them to be inexpensive and undervalued when compared with relevant benchmarks. Because the Global Insight Model is an alternative (i.e., long/short) strategy using a value bias, we have cited these alternative indexes for general comparison.
However, our portfolios may not necessarily be representative of these indexes and the volatility of our managed accounts may vary substantially compared to these benchmarks for reasons which include, but are not limited to: (i) Trapeze uses an active investment style to construct portfolios based on attractiveness to Trapeze of investments, sectors, and markets, from time to time; and (ii) certain accounts use leverage, short selling and options for clients who approve such strategies. When reviewing the performance of any fund/account (or composite) compared to a broad-based equity index, investors should consider the material differences between fund/account (or composite) and the index. Indexes are not investable themselves, and thus do not include the deduction of fees and other expenses associated with an investment in a fund or account.
Results reflect the reinvestment of dividend and other earnings. Returns are in U.S. Dollars. Past performance is no guarantee of future returns.
Manager commentary
Since the Global Insight’s inception in June 2012, our TRIMTM and TECTM models have suggested a full allocation to stocks with no macro driven short positions. Now that the U.S. market has risen to a ceiling in our TRACTM work and above our estimate of fair market value, we have opportunistically added several short positions in stocks we believe are trading at excessive valuations. We have also purchased put options on the S&P 500 as a partial hedge.
During Q3 we added Newfield Exploration Co. (NYSE:NFX), DeVry Inc. (NYSE:DV), Intel Corporation (NASDAQ:INTC), Joy Global Inc. (NYSE:JOY), Autodesk, Inc. (NASDAQ:ADSK) (sold after it reported Q2 earnings), Dean Foods Co (NYSE:DF) (since sold), Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), Hewlett-Packard Company (NYSE:HPQ), Agrium Inc. (TSE:AGU) (NYSE:AGU), General Motors Company (NYSE:GM), Weatherford International Ltd (NYSE:WFT) and Triumph Group Inc (NYSE:TGI). We parted with Kohl’s Corporation (NYSE:KSS), Jabil Circuit, Inc. (NYSE:JBL), ThyssenKrupp AG (ETR:TKA) (FRA:TKA), NetGear, Inc. (NASDAQ:NTGR), Archer Daniels Midland Company (NYSE:ADM), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), International Business Machines Corp. (NYSE:IBM), Metlife Inc (NYSE:MET), AIG, CST Brands Inc (NYSE:CST), Arrow Electronics, Inc. (NYSE:ARW), BMW, Randgold Resources Ltd. (ADR) (NASDAQ:GOLD), Cognizant Technology Solutions Corp (NASDAQ:CTSH), The Timken Company (NYSE:TKR), and Och-Ziff Capital Management Group LLC (NYSE:OZM).
Portfolio snapshot
Portfolio holdings and statistics shown below as at Sep. 30, 2013 for an actual representative account managed by Trapeze based on Global Insight Model.
About the Global Insight Model
Launched June 1, 2012, the Global Insight Model employs a proprietary and systematic process to uncover undervalued large cap global equities. The most undervalued decile of our global large cap universe forms the focus group for our analytical team to concentrate its research efforts. The undervalued stocks from the focus group that pass our research review process become targets for our equity portfolio. Our proprietary Trapeze Ratio of Adjusted Capital (TRACTM) system is used in an effort to optimize buy and sell decisions for targets and portfolio holdings.
In addition to rigorous stock screening and research, the Global Insight Model utilizes a parallel process to monitor economic and market risk. The business cycles of all major economic regions are monitored via our Trapeze Economic Composite (TECTM) model. Market risk is monitored by our Trapeze Relative Indicator of Momentum (TRIMTM), an algorithm that combines market momentum and volatility.
About Trapeze Asset Management
Established in 1999, Trapeze Asset Management Inc. provides discretionary portfolio management for institutions and high net worth individuals, primarily through separately managed accounts. We are value investors seeking long-term capital growth by investing in securities with potential for above-average appreciation, while striving to avoid permanent loss of capital. We do so using fundamental research and proprietary methodologies.
By Randall Abramson
Please visit TrapezeAsset.com for more information.
