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Florian Homm, Chief Investment Officer of Absolute Capital Management, said “The current sell-off in financial markets was largely anticipated by our group. As we stated in most of our June newsletters: ". another 5% to 10% market correction is likely at some point", given our concerns about rising inflation/interest rates, declining credit quality, peaking corporate profit margins and after a 4 year bull market. We observed that the poor risk/reward ratio offered little scope for further market advances. Accordingly, our funds assumed a more defensive posture and this enabled us to reduce the impact of the sharp sell-off in European equity markets.
Eight out of our ten hedge funds produced estimated net gains in July with minimal losses, which were -0.73% in the Absolute Activist Value fund (AAV), and -1.84% in the Absolute Germany fund (AGF). Both of our emerging market debt funds were ahead, between 0.50% (The Argo Fund) and 0.60% (The Argo Global Special Situations Fund.)
The AGF maintains a modestly net long bias of between 20%-30%, given our very optimistic outlook for the ongoing German revival, and so a down month was not un-expected. While we are of course not happy to record the first down month ever for AAV, our portfolio protection policy was effective. We believe that many other activist funds might have experienced more serious losses in July. All of our other funds made small gains in a tough month - ranging from net gains of a few basis ...................... To view our full article Click here
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