John Hempton‘s Bronte Amalthea Fund commentary for the month ended August 31, 2016.
The Bronte Amalthea Fund is a global long/short fund targeting double digit returns over the long term, managed by a performance orientated firm with a process and portfolio that is genuinely different. Objectives include lowering the risk of permanent loss of capital and providing global diversification without the market/drawdown risks typical of long-only funds. A highly diversified short book substantially reduces risk and enables profits to be made in tough markets. The fund is an alternative to equity investing, and complement to most portfolios, and is typically an excellent diversifier which may lower overall portfolio risk.
This month (unlike last) the fund could not keep up with resurgent global markets. With the VIX (crudely – the market’s fear gauge) complacently sitting at post Brexit lows across August and investor optimism remaining high the shorts proved a drag on performance. The investment adviser prefers however to retain a significant short book with the potential to reduce the cost of future market declines.
Bronte Amalthea Fund
Whilst our long book rarely changes – being based on quality deep value stocks, we are continuously curating our numerous short positions. The opportunity here is to rebalance and high grade the shorts – adding diversity and avoiding the “hot shorts” commonly found on Seeking Alpha and even on Twitter. This is bread and butter portfolio management that over time reduces risk and delivers value.