The month-end performance estimate as of September 30, 2013 for Horse Cove Partners High Yield
Strategy is +2.52%, net of fees. This brings YTD performance to +22.52%.1 Since its inception in December 2010, the strategy has a net rolling twelve month average return of +37.89%. This translates into a total cumulative return of +124.95%, versus +41.71% for the S&P 500 over the same period.
Market Recap and Commentary
The US equity markets rose strongly in September with the S&P 500 up 2.79% for the calendar month in spite of the pending budget and government shutdown debate in Washington. Markets were also affected by the Fed’s decision to maintain asset purchases, which provided a boost to asset prices, but left some uncertainty as to the effectiveness of Fed guidance moving forward. Further signs of improvement in the European economy, evidenced by positive ISM reports last month, also helped boost markets. The positive sentiment was somewhat dampened towards month-end by the political turmoil in the U.S. and Italy.
Performance and Trading Update
The September month saw pressure on option pricing on the call side. This has been a recurrent theme over the summer. However, when the market is rising, volatility typically is declining and as a result premium prices on short call options, while rising are not crashing up. We wrote puts on average approximately 6.0% out of the money each week and calls at approximately 3.4% each week. We were able to capture premiums from 4 1⁄2 weeks of option writing this month, although the last 1⁄2 week was a wash due to mark-to-market as the budget crises deepened in Washington.
Looking forward in October, Volatility as measured by the VIX has been rising and this is increasing both the premiums and distance out of the money that positions can be written each week.
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 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 09.30.2013, which is preliminary and subject to revision. Performance estimate described herein are net of fees and assume investor has been invested since 01.01.2013.
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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.
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