November Commentary & Performance

The Auspice Diversified Program was up 1.07% in November.

For those that missed our announcement last week, Auspice was awarded a Silver medal by Morningstar in the category of Best Opportunistic Hedge Fund

Monthly Commentary:

It’s becoming a common theme: November was volatile across many asset classes. As in recent months, November was highlighted by market interventions from governments and central bank forces. For some reason they believe they are having a stabilizing effect and the reality is quite the opposite. During the month, the equity market continued its erratic path. Many markets lost much of the gain made in October only to bounce aggressively in the final days of the month as Euro-zone efforts appeared to provide a magic bullet solution and buoy investor confidence.

Regardless, the equity markets remained down on the month, down in the second half of 2011, and down over the last 5 years. During the month, the Auspice Diversified Program managed to find enough of the prevailing trends to post a decent gain on the month. While this is often challenging to do in these periods of choppy volatility, we take comfort in allocating the appropriate amount of risk across a diverse basket of global asset classes and the widespread opportunity this affords the portfolio beyond the traditional equity and fixed income markets.

Note in the table above the correlation to the equity markets remains very low (to non-existent) in times of similar performance and somewhat negative when outperformance is needed most (08' and the last 4 years!).

Additionally, for those interested in more info and ideas about investing in alternatives, please check out AMFM blog.

Highlights of the month: In November, the Auspice Diversified Program was profitable in 4 of the 7 sectors traded.  

Since full diversification (achieved in June 2007) the annualized return is now +9.9% with 13.4% volatility, 25-30% lower volatility than the Equity market. The global equity markets remain down over this same period.

Interesting trades: While few positions were crystallized on the month, we had very profitable trades in Energy (both long and short) and Grains (short).  We also had success holding long term trades in Rates (long) and Metals (long Gold). 

Key Points Regarding our Positions

Energies: We hold the same positions as in October: we are short Natural Gas and long Heating Oil which was quite profitable. Crude is showing some strength but remains in a wide range over the last 6 months. Keep an eye on it in the near term. 

Metals:  Gold made a modest gain on the month while the rest of the sector was weak. We benefited from the weakness in Palladium and remain out of Copper at this time.

Grains: We took a new short position in Soybeans mid month as this market continues to erode. This complimented our short Wheat trade which combined to be our most profitable part of the portfolio. We remain flat Corn.

Soft Commodities:  Orange Juice continued a modest move higher and we remain long since October.  Cotton and Coffee are somewhat sideways and we are not participating at this time. Lumber remains choppy yet we remain short at month end.

Currencies: After exiting the US Dollar Index and the Yen last month, we also exited long positions in Canadian dollar, Euro, and Aussie dollar during the month. In the case of the Canadian dollar, we also entered a new short alongside the British Pound and Swiss Franc.  This is a fairly significant departure from the prevailing positions and opportunities in the last couple years.

Interest Rates:  Rates were profitable as we remain long the long end of the curve holding US 10 Year notes and 30 year bonds. We hold nothing in the short end of the curve. 

Equity Indices: We added to our short exposure in equities taking positions in Russell 2000 and Nikkei. The same can be said for Hang Seng, however, we exited the short in the violent rally that occurred on November 30th. We remain on the sidelines in Nasdaq and S&P.  While the market has bounced and is net positive in the last 60 days, the trends are tilted down in most of these markets.