The Auspice Diversified Program lost approximately 1.33% in August.
- Traditional investor sentiment has become mixed in the global equity markets with the US weak, Europe ending soft and the commodity laden Canadian markets strong.
- Bonds continue to drift lower (higher rates) with gains coming from both ends of the curve and both long and short.
- Currencies continued to be weak (vis-à-vis the USD).
- Commodities were generally higher on the month led by Energy, Metals and Ags:
- Metals continued higher and we crystallized some of the short gains.
- Grains were mixed with Soybeans rallying but Wheat falling.
- Energies were higher.
- Softs were profitable from the short side.
While not pervasive trends yet, the month seemed to be marked with a number of directional shifts. Commodities strengthened, Equity markets faltered, and rates continued to rise. Moreover, we saw the VIX rise and short gains were crystallized. Sustained trends would appear to be more prevalent and across more of the diverse sectors we participate in.
Sectors and Trades:
- Profitable in 4 of the 7 sectors traded. Positive sign that trends are picking up.
- Gains were led by Energy and Bonds with small gains in Currency and Softs.
- The most challenging sectors were Metals and Equity Indices.
- After cutting Equity risk in half in June and adding some exposure back in July, August performed negatively against our long positions and VIX short.
- Added Interest Rate risk (long short term Eurodollars), and holding short positions further on the curve.
- Largest portfolio gains came from long petroleum (WTI and Brent Crude, GasOil), exited short VIX, short Aussie and Canadian dollars, long Soybean Meal, short Wheat and short Sugar.
Key Points Regarding our Positions
- Petroleum based energies were the strongest sector led by a new Brent Crude position as well as GasOil and an existing WTI Crude position.
- We have taken new long positions in Gasoline complimenting the domestic Heating Oil market. These two markets have been choppy on the way higher.
- Natural Gas rallied against our existing and held short position.
- This sector tilting long marks a shift in trend to be noted.
- The Metals sector was the weakest sector as markets rallied across the board. We continued to give back some of the gains while crystalizing others and cutting risk overall. While negative on the month, this largely captures the most profitable commodity sector for the strategy in 2013 (and right behind Equity overall).
- Exited Gold short mid-month prior to a significant rally. Great trade put on in January.
- Exited shorts in Silver and Platinum as well as Zinc, Nickel and Copper.
- Only Metal position is a new long in Silver.
- Grains had a small loss despite tactical positioning throughout the sector.
- The loss came from one of the profitable shorts last month in Canola when it rallied sharply in August. We have covered this to capture the overall gain.
- Gains were made long Soybeans and Soybean Meal while being short Wheat and Corn.
- Despite the monthly loss, the strategies are performing very well in this sector.
- Softs were profitable in August on the back of shorts held in Coffee and Sugar.
- Other markets such as Lumber and Cotton were mixed and choppy, and we are on the sidelines.
- Small gain in FX as most currencies moved lower versus the US Dollar.
- We continue to hold shorts in Canadian and Aussie Dollars that were profitable.
- We exited the Euro for a small loss as this market remains choppy.
- Rates were profitable as we hold short positions in Long Gilts (UK), US 30 year Bond and 10 year Notes.
- Added a long position in Eurodollars.
- Curve play at work with shorts in the back part of the curve and long the front.
- Equity sector was not profitable on the back of weakness in the US and Europe. Exited long position in S&P.
- Holding a long position in Nasdaq while entering and quickly exiting the Dow Jones Euro Stoxx 50 Index for a small loss.
- Short position in VIX futures was exited and quite profitable. VIX has popped up substantially from its lows starting August. The strongest of the equity markets is the TSX 60 and we are close to an entry at the start of September.