Below are excerpts from the quarterly report of a private family office we manage. Results are only audited on an annual basis.
(Excerpt)
March 31, 2016
To the Shareholders of TwinPeak Capital:
TwinPeak Capital NAV (the “TWIN”) increased 3.77% versus a 8.28% loss for the iShares Core MSCI Pacific ETF (the “MSCI Pacific”) for the 9-month period that ended March 31, 2016. The following table compares the TWIN’s unaudited performance (after fees) with that of the MSCI Pacific for various periods ending March 31, 2016.
At March 31, 2016, the value of a SG$10,000.00 hypothetical investment in the TwinPeak Capital at its inception is worth SG$10,377 compared to SG$9,172 for the MSCI Pacific.
Market Commentary:
More than $2.3 trillion was wiped off global stocks as China’s slowing economy and currency depreciation spooked investors around the world, leading to the worst start to a year for markets in at least two decades. To make matters worse, the Chinese government botched interventions in local stock exchanges while Brent Crude prices dipped below $30, heightening the already jittery market.
Equity markets have recovered substantially since then, though returns are still negative for the year. We have the following year-to-date returns for the markets which are invested in:
Markets are expected to remain volatile but we will continue to exercise investment discipline and remain within our circle of competence.
We have utilised the cash from the last quarter and the inflow of new capital to purchase new and accumulate existing undervalued equities when markets plunged at the start of this year. However, some 7.59% in cash is maintained in the event that markets do get cheaper.
Portfolio Review:
For 3Q2016, the portfolio returned 0.36% nett of fees. Honesty and objectivity are the key pillars of TwinPeak Capital and we consider the portfolio performance to be bittersweet. We are pleased that we have managed to outperform the benchmark indexes. As the table below demonstrates, our portfolio returns (including dividends and nett of foreign exchange differences) are superior to the market index in every country.
In domestic currency terms, our portfolio returns would actually be much better considering that we were negatively impacted by unfavourable foreign exchange developments this quarter. This fact affirms the accuracy of our stock selection. However, this does not absolve us from all blame given that we chose the markets along with their respective currency risks. We are disappointed with the returns of the Japan portfolio. Despite its outperformance to Nikkei 225, a -8.99% return is still a drag on our overall portfolio performance. We will be evaluating the merits of staying invested in the Japanese market moving forward. Lastly, like a falling tide — the poor market conditions have resulted in a muted return for our portfolio. While we remain confident of meeting the 10% long-term annualised return benchmark that we have set for shareholders, it is unlikely that we are able to meet this hurdle rate for this fiscal year despite outperforming our market benchmarks.
