Insight into Trapeze Asset Management’s global insight.
Our large-cap long/short strategy commenced June 1, 2012. We employ a proprietary process to systematically uncover undervalued large cap global equities. We select the most undervalued securities out of our universe to form the focus group for our analytical team to concentrate its research efforts. Those that pass our research review become targets for our equity portfolio.
In addition to rigorous 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 Economic Composite (TECTM). Market risk is monitored by our Relative Indicator of Momentum (TRIMTM), an algorithm that combines market momentum and volatility.
Trapeze Asset Management – Long/Short
As of April 30, 2015, the Global Insight’s net performance (in USD net of all fees and expenses) is 6.6% per year since inception (June 1, 2012)—9.0% per year gross of fees1. This compares to the Equity Hedge Fund Index at 6.9%, in USD per year over the same period. Our overall performance has been hurt by our short exposure, even though it was relatively low, and market puts—included sporadically when we felt the market was vulnerable.
Trapeze Asset Management – Shorting
The drag from shorts and put buying has caused us to review our hedging activities. We became concerned about the market’s valuation level early in 2013 and began hedging, notwithstanding that we had not received negative alerts in either TECTM or TRIMTM. However, in our backtest for the Global Insight Model, long positions were hedged with shorts only when either our TECTM or TRIMTM triggered alerts of recession or bear markets, respectively. Accordingly, we have now limited our hedging activities awaiting our proprietary signals.
Trapeze Asset Management – Performance Attribution – Longs
The longs (in USD excluding fees but including dividends and net of commissions and withholding taxes) have returned 15.3% annualized since inception versus 17.5% for the Morgan Stanley World Index (MSWI).
Our performance has been restrained since last June by the declines in commodity prices which have negatively impacted our resource holdings.
We continue to be pleased with our long selection process which is evident from the statistics of our realized transactions since inception (Table 1).
The average hold period has been relatively short as the longs have either approached our fair value estimates, allowing us to sell them at a gain, or they’ve broken below their TRACTM (our ratio of adjusted capital, a trade optimization tool) floors prompting sell signals. These statistics are illustrative of our process—to systematically uncover, then analyze and buy undervalued large caps while attempting to limit our exposure to companies where the fundamentals may be worsening.
About Trapeze Asset Management Inc.
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. Please visit TrapezeAsset.com for more information.
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