Monthly Letter November 2015

If you thrive on vola lity then 2015 must have been a great year. We have previously commented on the fact that the European equity markets almost every year have a correc on of at least 10%. As we write this le er in the middle of December the Eurostoxx 50 has had 3 correc ons of at least 10% with the biggest one close to 20%. S ll, the market is marginally posi ve for the year. Any funfair would be proud to have such a roller coaster to o er its visitors. Managing capital in this kind of environment is a bit of a challenge and our overall performance is a re ec on of the market vola lity. Madrague’s main investment edge is not about predic ng the direc on of the market. We take a view on a number of individual companies and the sum of all those investment decisions is what you see as the aggregate long and short. Even if we are correct in our assessment of a company it is rare for a stock to perform in opposite direc on of the sector and the overall market. There have been a few very strong trends though.

The most apparent one (at least in hindsight) is the weakness in energy and basic materials. The other big trend has been the strength of the USD which has had a big impact on the currency-sensi ve companies. For Madrague the swings have created opportuni es but also some unnecessary starts and stops, where we have had to reduce risk due to our disciplined risk management. We will get back to you with a more detailed review of the year and our thoughts for 2016 in our yearly letter.

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