Monthly Letter June 2012

Madrague has had a very tough start to say the least. We have been cautiously bullish to the market. This is what we wrote in our first monthly letter 4 months ago: “Even though we are quite bullish about the near term prospects we think that there could easily be a pullback in the next couple of months. Less and less negative factors are being priced into the equity market. We have not given those factors any room in this monthly letter. The EuroSTOXX50 has had at least one 10% fall in each of the last 10 years. We do not think that 2012 will be an exception.”

This year has proven to be no exception. Our start came pretty much at the top of the market so far in 2012. The hypothetical question how we had performed if we had started at the beginning of the year is totally irrelevant. We have an obligation to perform and a responsibility to our investors from the day we start. Nothing else matters. We thought we managed the portfolio in a careful manner. When assessing the gross and net exposure we have employed since inception we would argue that we have worked with very low risk. Only in a few months following the Lehman crash and the subsequent global economic heart attack have we worked with similar or lower exposures. Since inception in February our average gross exposure has been around 100% and the net exposure c20%. We have at no point had more than 2% of the fund invested in illiquid positions. Given those numbers we are very disappointed to be down c9% since inception. The equity markets might not have been friendly to us, but we do not consider these times to be too extreme.

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