BlackPearl Masters Fund Newsletter January 2019

In January the BlackPearl Masters Fund finished the month up +0.42%. During the month 5 of 9 strategies finished in positive territory. A number of our strategies bounced back sharply in January and recorded mid-single digit returns for the month while the strategies that generated positive results in December gave back some their gains as the short positions, they had profited from in the previous month bounced back with the market.

The stand out strategy for the month was our long-short variable beta strategy. The strategy benefited from a position in HeidelbergCement +13% a global construction company that performed well in January on the back of an improved outlook towards global growth and prospects of rising infrastructure spending in some of its core markets. The strategy also benefited from a position in Newscorp +8% after the stock recovered from a fall in December which occurred on no specific news flow.

Another strong performer for the month was our long short market neutral strategy which finished the month up just under +5%. A number of the strategies positioned rallied strongly in January including Appen +24%, New Hope Coal +18% and Seven Group Holdings +11%.

The strategy also took advantage off and traded around the corporate activity between Shire and Takeda. Takeda is Japan’s largest pharmaceutical company and is acquiring Shire an Irish headquartered drug maker of similar size. Takeda’s purchase of Shire is unusual as it is the largest foreign buyout executed by a Japanese firm. A long position was acquired during the month in Takeda as the stock was sold off by the market over concerns around the companies US$56 billion acquisition of Shire.

In January, a number of the strategies were impacted by a jump in in iron ore prices which occurred after the unexpected catastrophe at Vale’s Brumadinho mine tailing dam collapse in Brazil which led to iron ore companies share prices rising sharply.

Our long short global macro strategy benefited from positions in US mega cap technology companies including Amazon, Alphabet and Facebook with all three-reporting strong revenue growth. Our managers believe that these companies are likely to be more insulated from any fall out between the US and China as many of them have already essentially been locked out of the Chinese market.

We expect that the equity market will remain volatile in the short to medium term likely to be driven by geopolitical events such as Brexit, US/China trade tensions and Chinese Government policy which we believe should result in good opportunities for the fund from both the long and short side.