The Auspice Diversified Program was down 1.19% in March.
March was one of those months when you are left shaking your head. It felt like a much better month than the number suggests. Why? Sometimes it hurts to do the right thing. In this case, most of the small loss on the month was due to a pullback in interest rate futures and taking profits in the most profitable sector we have had in the last 12 months.
Monthly commentary:
In March, the Auspice Diversified Program was profitable in 3 of the 7 sectors traded. As in the first two months of the year, the equity market continued to trend up. Energy also provided opportunity to ride the existing trend in natural gas. Grains were flat on the month. The most challenging sectors were Interest Rates and Metals.
Interesting Trades: We exited a long standing trade in US 30 year bond futures. This was a great trade and nearly completes profit taking of this sector. We now hold very little interest rate exposure. This is a significant shift in our risk and exposure.
Since full diversification (achieved in June 2007) the annualized return is +8.44% with 13.19% volatility. This remains 25-30% lower volatility than the Equity market with a low negative correlation. The global equity markets remain down over this same period.
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Key Points Regarding our Positions
Energies: Energy had a positive month largely on the back of the long standing short trade in natural gas. Natural gas continued its aggressive sell off after a short hiatus in February. Gasoline continued to modestly trend higher and we remain long. However, Crude Oil and Heating Oil were very choppy and trended lower against our outstanding positions.
For those with specific interest in this sector alone, please contact Auspice regarding the launch of our Energy focused strategy in collaboration with Pulse Capital. The program went live on the March 1st.
Metals: Metals moved lower during the month, against our Gold and Palladium positions. As such we exited Palladium before further deterioration but hold Gold. Copper remains sideways and we are waiting for trend direction.
Grains: Grains were a mixed bag and remain in a transition phase. Soybeans continued higher and we entered a new long position. Corn was weak into month end an we entered a new short position. We remain short Wheat which moved sideways on the month. Grains continues to be a sector to watch closely for direction and opportunity.
Soft Commodities: Softs were not profitable in March as Orange Juice gave back some more of the upside and we remain long. We remain short Cotton which is a long term down trend but it moved against the trend during the month. Unfortunately, the gains being short Coffee and a new short in Lumber did not offset these counter trend moves. Patience.
Currencies: Currencies were challenging during the month as overall market choppiness and commodity weakness hurt established trends. We remain long Aussie dollar that followed commodities lower on the month and provided the bulk of the sector loss. Canadian dollar was not as weak on the month but did not help us either. We remain short the Euro which traded lower then back up to close right where it started. We remain on the sidelines in US Dollar Index, Swiss Franc, British Pound, and Japanese Yen.
Interest Rates: Despite Interest rates again being the least profitable sector, all was not lost. We crystallized gains in US 30 year bonds returning over 7 times our initial capital risked. We also exited US 5 year notes, a trade entered in December and not provided the same upside opportunity. We remain long the US 10 Year notes. Interest rates were the most profitable sector over the last 12 months and we have crystallized almost all of this gain. Mission accomplished.
Equity Indices: Equities were again very profitable as the market grinds higher. We added to the exposure with Nikkei and remain long positions in Russell, S&P 500, and Nasdaq. We are flat the CAC40 Paris and the Hang Seng.