We are pleased to announce that the Horse Cove Partners' strategies have been featured in BarclayHedge’s monthly performance rankings.
Horse Cove Partners' Enhanced Yield strategy was ranked number 5 in their Option Strategies category in February 2023.
Horse Cove Partner's Absolute Return strategy was ranked number 7 in their Option Strategies category in February 2023.
The Enhanced Yield Strategy was up 0.50%.
The Money Plus Strategy was up 0.38%.
The Absolute Return Strategy-Composite Portfolio Margin was up 1.66%.
The Absolute Return Strategy-Composite Reg. T Margin was up 1.34%.
Equity Market Recap and Commentary
March was a volatile month for the major equity and bond indexes as inflation expectations and attempts to discern the future actions of the Federal Reserve Board continue to control the narrative. The S&P 500 Index seems to be locked in a trading range between 3800 and 4200. While this is a pretty large range, it has impacted the price of premiums further out of the money where we write.
The first half of March saw a relatively quick move down to the bottom of our range on renewed inflation worries and the collapse of a few large banks. Investors’ fears were quickly calmed by the seemingly unlimited resources available to the FED and assurances by the United States Treasury, (Janet Yellen) to keep everyone’s money safe.
Looking back at the year so far, from January through February 2, 2023, the S&P 500 climbed 8.98% on softening inflation. This was quickly reversed from February 2 to March 13 when the index fell (7.53%) on growing fears over the stability of the financial system. This was again quickly turned right back around with the S&P 500 rallying through the end of the quarter, climbing 6.67% on calming rhetoric from both Jerome Powell and Janet Yellen. These are not signs of a healthy market.
While investors continue to shrug off the multitude of problems facing the economy and the world, tensions seem to be building behind the curtain. Monthly swings of over 5% in major indexes show us that no one is convinced about what direction we are headed, and while markets generally want to go up, investors (fund managers and their algorithms) seem to have a hair-trigger. Of the approximately 7% advance in the S&P 500 in the first quarter of 2023, over 90% of it was the result of just 20 stocks. Without those 20 large-cap growth stocks, the S&P 500 would be up just over 1.5% for the year. Again, this is not a healthy market.
Fixed Income Commentary
The market’s expectations of further rate hikes reversed in March leading to falling rates across durations. The composite index of the Bloomberg US Aggregate Bond Index TR gained 2.54% in March.
Source: https://www.bloomberg.com/quote/LBUSTRUU:IND
The benchmark 10-year US Treasury Note yield fell over (11%) in March to 3.48%.
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:
IRA accounts must use Reg. T Margin which means that fewer option contracts may be written than in the “regular” accounts that use Portfolio Margin. Over time, this may also result in lower returns when compared to the “regular” accounts.
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 3.31.2023, 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.
THIS MESSAGE AND ANY FILES TRANSMITTED WITH IT ARE CONFIDENTIAL AND PRIVILEGED. IF YOU ARE NOT THE INTENDED RECIPIENT, PLEASE NOTIFY THE SENDER IMMEDIATELY AT 1 (678) 905 5723. IF YOU ARE NOT THE NAMED ADDRESSEE YOU SHOULD NOT COPY OR DISCLOSE THE CONTENT OF THIS MESSAGE AND ANY FILES TRANSMITTED WITH IT TO ANY OTHER PERSON.
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.
