Black Bear Value Fund interim update for the month of March 2020, discussing their large credit shorts and the state of the markets.
Dear Partners and Friends –
Any and all existing LP’s or prospective LP’s please read as details will apply to you.
I wanted to provide a quick update given the current state of the world and financial markets. Health comes first and I wish for all of your families to be healthy and safe.
Black Bear Value Fund In A Great Spot
Month to date we are down ~3% thru today while the S&P 500 is down ~17%. Our credit shorts are benefiting our portfolio in a material way. Prudence was lacking when these debt securities were issues and now the ability to be paid back is being called into question.
There is a tremendous amount of fear and anxiety percolating throughout the world. Fear of the unknown can be paralyzing, especially if you have not experienced it before. We are NOT in that position and are playing offense prudently when others are on defense. As many know, I spend a lot of time reading and learning. Preparation and practice seem burdensome and monotonous to many. To me, it’s the source of confidence and calm during turbulent seas. We are going to be ok.
Being flexible and changing your mind is an important characteristic that I am constantly trying to fine tune. While I believe the airlines are a great long-term business, I also believe that I am witnessing something that has no precedent. As a result, I decided earlier in the week to exit those positions and re-evaluate them. Facts could change and I could change my mind again. Many high quality names are being sold alongside weaker ones and I thought it was the prudent move. We may have a once in a decade opportunity to buy incredible businesses at very cheap prices.
We are in a great spot. And we get to have our choice of what to do and are getting big fat pitches to swing at.
New LP And Large Credit Shorts
We have some new LP’s joining the partnership and existing LP’s contemplating adding. Depending on the capital amount coming in, I may have to put a size cap on new money. It will be dictated by market conditions. The reasoning is we have large credit shorts and I want to limit the dilution to our existing LP base. All existing LP’s will get priority over new LP’s. In order to facilitate this I am requiring all documents to be in by next Friday, March 20th and all wires to be sent on Monday March 23rd. If we run into a size cap I will let the appropriate people know prior to their wire date.
If you are planning on investing/adding please communicate that to me ASAP and follow the timelines I have put above. Please join me in wishing all elected officials around the world calm minds, rational decision making and détente with respect to political partisanship. This is a time for us all to root for each other.
Black Bear was designed for this kind of storm and we are going to come out of it in great shape. Thank you for your partnership and support.
Wishing you and your families good health, peace and happiness.
This article was first posted on ValueWalkPremium