Monthly Letter July 2016

A er the very vola le run-up to the Brexit vote and the subsequent market crash a er the UK did vote to leave the European Union, we experienced quite a market recovery in July. As equity markets recovered, so did the sovereign bonds across Europe. The spread between Germany and Italy/Spain contracted notably. These spreads are at the front of our screens as a rst sign of whether the markets are ge ng worried about the Euro. The interes ng part of the rally in July, is that bonds are rallying with equi es (or maybe vice versa). It is not a risk on or risk o market. We are talking about anything-with-a-yield rally market. This very well might be just what the global central banks want, but we are skep cal that a fabricated asset rally will ins l con dence in the economy. But we do hope we are wrong on that point. An interes ng data-point came from the latest FED senior loan o cer survey. The indica on from com- panies is that they are looking to increase borrowing for capex purposes. That would indeed be good news. However, Madrague, and the investment community we believe, would be posi vely surprised if that were to happen.

Madrague had another good month in July, +2.62% which brings the year to date gure to +5.71%. Sectors of note in July:

Basic Resources: Our best performing sector in July, +1.3%. Our gross and net exposure in the sector has been quite limited given the vola lity. In spite of that, the sector was our stand-out performer in a very bullish month for equi es. Our long posi ons in SSAB and ArcelorMi al were the best performers. We are also very happy with the short in SCA which generated a posi ve return. All posi ons are s ll in the fund with very minor changes.

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