The month-end performance estimate as of November 30, 2013 for Horse Cove Partners High Yield
Strategy is +0.55%, net of fees. This brings YTD performance to +23.21%.1 Since the inception of trading in December 2010, the strategy has achieved a total cumulative return of +126.37%, versus +52.18% for the S&P 500 over the same period. Over the last three years, the strategy has not had a negative quarter.
An account opened in December of 2010 with $250,000 and assuming no withdrawals would now be worth $565,923 as of the end of November 2013.
We are also pleased to have welcomed two new clients to the Horse Cove High Yield Strategy this month. Assets under management have now risen to just over $4 million dollars. We want to thank our new clients for their confidence and look forward to helping those of you that are following us, in the future.
Market Recap and Commentary
The US equity markets rose to new highs in November with the S&P 500 up 2.7% for the calendar month. Markets were also affected by the Fed’s decision to maintain asset purchases, which provided a boost to asset prices. There is some talk about a top in the markets as new highs are achieved and the upside movement seems to have stalled. There are no signs that the Federal Reserve will ease its quantitative easing, and with the nomination of Ms. Yellen, seems to support that belief. Maintenance of historically low interest rates, coupled with $85 billion of bond purchases each month by the Federal Reserve could lead to more of the same for the markets.
Performance and Trading Update
The November was a relatively quiet month with the underlying stock indexes rising during the month. Volatility has been bottoming out, jumping on news and then settling back down making for some pressure on margins. Interactive Brokers has been tightening margin requirements and making adjustments on an almost daily basis. The word we have is that they are tightening things up on the expectation of a correction. This has resulted in some minor distractions in our trading and along with the timing of mark to market at the end of the month reduced slightly our monthly return from our historical average. We wrote puts on average just under 5.0% out of the money each week and calls at an average of approximately 2.6% each week.
We expect that this tide of higher highs each week in the market will break and that there is a correction on the horizon. This should lead to a rise in volatility and as a result, higher premiums for selling our unique “insurance” at levels farther out of the money each week.
Horse Cove High Yield Strategy
In our view, one of the appealing features of the Horse Cove High Yield Strategy is the commitment and consistency of the process. Our focus is not on product, but rather the consistent application of an investment process, which we believe, as it is consistently applied, will produce attractive results over time. By remaining focused on the application of the process, the outcome is almost a fait accompli and we can ask “When?” not “If?”.
About Horse Cove Partners
Profiting from the art and science of taking risk.®
Horse Cove Partners was founded by Sam DeKinder and Kevin Ellis in January of 2013 with the commitment to help grow client’s assets with a highly disciplined investment strategy, replicated weekly, to extract absolute returns from the market by trading short volatility option spreads. The firm was launched after more than two years of trading experience with personal assets, and is built on the strength of hedge fund trading expertise developed since 2002.
“We do not believe we are smarter than the market, nor can we time the market in any given week or month. As a result, we take an investment approach similar to an insurance company in that our investment strategy focuses on probability of success and the management of risk. We believe that it is possible to realize positive returns through disciplined focus on the risk of each trade with a weekly investment horizon, and accepting intelligent losses when risk events occur.”
We would like to thank you for your continued support and look forward to being in touch with you soon.
Sincerely,
Sam DeKinder and Kevin Ellis
sdekinder@horsecovepartners.com
kellis@horsecovepartners.com
Horse Cove Partners LLC
1899 Powers Ferry RD SE
Suite 120
Atlanta, GA 30339
678-9055723 main
1Net estimate as of 11.30.2013, which is preliminary and subject to revision. Performance estimate described herein as “YTD” are net of fees and expenses and assume investor has been invested since 01.01.2013 with no withdrawals.
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Internet communications are not secure and subject to possible data corruption, either accidentally or on purpose, and may contain viruses. The content of this message should not be construed as an investment advice unless explicitly stated as such in the text of this message. Further, this message should not be construed as the solicitation of an offer to purchase or an offer to sell any securities or other financial instruments, including, without limitation, interest in any private investment managed by Horse Cove Partners LLC or any of its affiliated entities.
Finally, to the extent that performance information is contained in this message, you are hereby advised, and you acknowledge it, that past performance does not assure future results, which are not guaranteed by Horse Cove Partners LLC or any of its affiliated entities or by any insurance mechanism.
IRS CIRCULAR 230 NOTICE. Any advice expressed above as to tax matters was neither written nor intended by the sender or any Horse Cove Partners LLC affiliated entities to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed under U.S. tax law.
