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The Auspice Diversified Program gained 0.66% in June despite significant market turbulence and correction.
Traditional markets followed up a volatile May with a correction in June hitting commodity based equity markets the hardest. Most fixed income markets continued to reverse sharply lower in June, a move that started early May.
Commodities were generally lower:
- Metals were again most opportune with gains made on the short side.
- Grains were also lower.
- Energies were mixed with Natural gas lower on the month and petroleum based slightly higher.
- Softs were soft.
- Currencies were volatile reversing directions a number of times with general weakness in the US Dollar Index.
It’s good to be short! Months like June highlight why we are direction agnostic and willing to participate in trends regardless of common opinion. With the equity markets at very least stalling and beginning to come off following the correction in Fixed Income and commodity, we are reminded that opportunity can come from being short as it did to end 2008. This is the time to consider adding or increasing CTA exposure if you are looking to protect traditional asset weightings or take an opportune and tactical view.
Sectors and Trades:
- Profitable in 3 of the 7 sectors traded. Gains were led by Metals, followed by Grains and Energy largely from the short side.
- The most challenging sectors were Currency and Equity Indices.
- The open equity risk continued to shift to commodity during June.
- We have cut Equity risk in half.
- Largest portfolio gains came from Gold and Copper from short side. Short Wheat, Natural Gas, and Coffee were also large contributors.
- Very profitable short in Japanese Yen was crystallized.
Key Points Regarding our Positions
Energies:
- Petroleum based energies were slightly positive led by Crude. We are on the sidelines currently.
- Natural Gas was weak and a new short was entered early in the month and quite profitable on the month.
- Sector was positive based on the Natural Gas trade.
Metals:
- Strongest sector with opportunities in Gold and Copper on the short side,
- Added new short in Palladium late in the month,We have resized the risk in this sector, crystallizing some of the short gains made.
Grains:
- Grains made gains on the back of the short in Wheat we have held since February.
- Long Soybeans corrected lower but still remains the strongest of the grains. Remain on sidelines in Corn which corrected sharply lower at month end.
Soft Commodities:
- Cotton continued to behave in an erratic manner rallying to start the month and giving it all back by the end, We tried a long position but exited quickly as the trend lacked persistence. Lumber was similarly whippy in the opposite order and we remain flat.
- Continued gains from short Coffee while long Orange Juice did not provide the breakfast blend it did in May. We are still long OJ and monitoring trend closely.
Currencies:
- Currencies continue to be a tough trade with sharp moves up and down within the month across most major markets.
- We exited the very profitable short Japanese Yen trade early in the month before the whippiness ensued. The trade returned approximately 7 times capital risked.
- After exiting long positions in both commodity currencies (Aussie and Canadian dollar) in May, we have flipped these to short.
- Exited recent new shorts in Euro, Pound and Swiss Franc.
- Exited recent new long the US Dollar index.
Rates:
- We are currently on the sidelines in all rates after exiting long positions.
Equity Indices:
- We gave back gains in long equity indices as the market started to correct globally in various amounts. This crystallized some profitable positions.
- After exiting the Nikkei May 31, we also exited the Nasdaq and the Hang Seng.
- We continue to hold the strongest of the markets in S&P, Russell and CAC 40.
- Exposure to long equity has been cut by 50% in the last month.