We are pleased to announce that the Horse Cove Partners Enhanced Yield strategy has been featured in BarclayHedge’s Yearly performance rankings. Horse Cove Partners Enhanced Yield strategy has ranked number 4 in their Option Strategies category for 2022.
The Enhanced Yield Strategy was up 0.49%.
The Money Plus Strategy was up 0.28%.
The Absolute Return Strategy-Composite Portfolio Margin was down (2.18%).
The Absolute Return Strategy-Composite Reg. T Margin was down (1.69%).
Equity Market Recap and Commentary
January was a very strong month for the S&P, with 8 of 11 sectors showing positive returns. Some of the most hated stocks from last year posted outsized returns to start 2023. The sharp rally in China from reopening apparently spilled over to the US and investors found themselves more fearful of missing out on upside returns (FOMO) rather than losing to the downside and piled into the same equities that just a few months ago could not catch a bid. ZeroHedge has named this the “great dash for trash”, and it still appears in line with a bear market squeeze catching under-positioned (bearish) investors off guard and forcing them to cover. Markets are known for inflicting maximum pain on investors and tend to reverse what the consensus expects to happen.
The combination of the China reopening, apparent easing inflation, and expectations of a more dovish FED has given investors all the reason they need to throw caution to the wind and pile back into risk assets. To us, this feels eerily like the end of 2001. In fact, the last time the Nasdaq had such a strong start to a year was 2001, after which it proceeded to fall another 30%.
This rally may have some more room to go to the upside, but our opinion remains that we will likely see new lows before we make any new highs. As earnings continue to be reported, we are seeing many forward estimates revised down, banks setting aside massive sums for reserves to cover losses, and the largest layoff announcements we have seen in some time. It appears “the smartest people in the room” are preparing for tough times ahead.
Fixed Income Commentary
2023 started out with falling interest rates as traders expect the Federal Reserve Board to slow or stop interest rate hikes as it battles decades-high inflation. The composite index of the Bloomberg US Aggregate Bond Index TR gained over 3.0% in January.
Source: http://bloomberg.com/quote/LBUSTRUU:IND
The benchmark 10-year US Treasury Note yield fell over 7% in January, to 3.52%.
Performance Updates and Benchmarks
Here are the composite net returns for the Enhanced Yield Strategy for the periods indicated:
Here are the composite gross returns for the Money Plus Strategy for the periods indicated:
Here are the composite net returns for the Absolute Return Strategy-Portfolio Margin for the periods indicated:
Here are the composite net returns for the Absolute Return Strategy-Reg. T for the periods indicated:
About Horse Cove Partners LLC
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 the 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 that began in December 2010. The firm is built on the strength of hedge fund trading expertise developed beginning in 2002.
The firm offers clients multiple option strategies, including overlay strategies on equity and bond portfolios as well as: Absolute Returns, which commenced trading in December 2010, Enhanced Yield, which began trading in June 2017, and Money Plus, which began trading in August 2020.
“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 the probability of success and the management of risk. We believe that it is possible to realize positive returns through a disciplined focus on the risk of each trade with a weekly investment horizon, and accepting intelligent losses when risk events occur.”
We thank you for your continued support.
Sincerely,
Sam DeKinder, Kevin Ellis
Greg Brennan
Don Trotter
sdekinder@horsecovepartners.com
kellis@horsecovepartners.com
gbrennan@horsecovepartners.com
dtrotter@horsecovepartners.com
Horse Cove Partners LLC
1899 Powers Ferry RD SE
Suite 120
Atlanta, GA 30339
678-905-5723 main
1Net estimate on a consolidated basis of similar accounts as of 1.31.2023, which is preliminary and subject to revision. Performance estimates described herein as “YTD” are net of fees and expenses including a 2% per year management fee and 20% incentive fee and assume investors have been invested the entire time with no withdrawals. Individual account returns may vary depending on cash flows, the time period assets are invested, and restrictions placed on the account.
This was prepared by Horse Cove Partners LLC a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Additional information about our firm is also available at www.adviserinfo.sec.gov. You can view the firm’s information on this website by searching for our firm name.
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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 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.
This material has been prepared solely for informational purposes only. Strategies shown are speculative, involve a high degree of risk, and are designed for sophisticated investors.
Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal and fluctuation of value. The information herein was obtained from third-party sources. Horse Cove does not guarantee the accuracy or completeness of such information provided by third parties. All information is given as of the date indicated and believed to be reliable. Performance results are estimates pending verification. The returns are based on the Investment Manager's strategy and the compilation of actual client account trades. The Horse Cove Absolute Return and IRA Return strategies seek to extract absolute returns from the market by trading short volatility option spreads. The Enhanced Yield strategy seeks to achieve a targeted return trading only puts with a high probability of success.
The strategies reflect the deduction of advisory fees and any other expenses that a client would have paid or actually paid. The S&P 500 Index is used for comparative purposes only. The volatility of an index is materially different from that of the model portfolio. The S&P 500 refers to the Standard and Poor's 500 Index which is a capitalization-weighted index of 500 stocks. The index is designed to measure the performance of the broad domestic stock market. The VIX (CBOE volatility index) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward-looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." Investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Options trading entails a high level of risk. The models do not include the reinvestment of dividends and capital gains because options don't pay dividends. Please read the Characteristics and Risks of Standardized Options available from the Options Clearing Corporation website: http://www.optionsclearing.com for further details.
