Monthly Letter June 2014

The year has been a struggle so far. The asset markets are quietly trodding along with very li le convic on. Dispersion between asset classes are unusu- ally low. For us at Madrague it has been frustra ng to watch and invest in. Hard earned performance over a month wiped out in a few days and some mes a couple of weeks struggle has been reversed in just a few days. Both the macro and micro trends have shi ed fast and according to us, randomly. One way of expressing this is to say that it has been a trading market where you should sell the outperformers and buy the laggards as reversal to the mean will occur quite fast. We would characterize our investment style as mean reversion, but this has not helped us so far in 2014. The valua ons/prices have not strayed far enough from our mean.

For the year we are now +2.79%. We were aiming for something be er than that. In fact we are always aiming for something be er. Guess that is part of human nature. The monthly numbers that get us to the 2.79% is a bit unusual for us though. We have 5 posi ve months and only 1 nega ve. That ra o is be er than our historical average, but the fact that 4 of the months have a lower absolute return than 40 basis points is very uncharacteristical.

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