Equities (+33%)


A victory, but in many ways a hard fought one and casualties on the way. I did cut some of the equity short at the highest levels, as I become concerned that my view that US and UK equities were over-valued might be right, but the amount of risk I had to the view was wrong. Shortly afterwards, the equity market in the US finally cracked. However, the associated volatility provided the opportunity to write some deep OTM calls to hedge out some of the short and capture implied volatility at 40%.


Bonds (-20%)


The Conservative / Lib Dem coalition means fiscal consolidation is on its way in the UK. But any party would have done the same and the fact the Conservatives hold the reins does not mean the UK budget deficit will narrow much more significantly than if Labour had won the election. Nevertheless, the credit worthiness of gilts seems better than other European countries, just because the UK can print money, which makes the recent strength of sterling all the more bizarre. If an investor likes gilts because of their creditworthiness, they should be shorting sterling as well. Inflation in the real worry for UK bond investors. Inflation is a key threat - any country which has devalued its currency by 30% (with more on its way) will succumb to inflation, even if there is negative fiscal thrust.


Currency (+15%)


Good contributions from the short to NZD/USD which fell as risk assets fell and strong performance from the overweight to SGD out of GBP - it was much better to hold the short to GBP in USD type of currencies than those in EUR. The HUF sold off versus the EUR so I closed the position, at a marginal loss overall. Overweigh to EUR out of CHF and MXN and SGD out of USD detracted marginally.


Commodities (+1%)


A little short to gold was the only contributor and the position is now closed.


Single Equities (+5%)


All the shorts to the single equity positions added value, proving they are indeed correlated with the macro view of being short equities. A few of them did perform worse than the overall equity market, but not much evidence of equity stock selection skills.