Updated: Oct 24, 2018
The BlackPearl Masters Fund decreased 0.22% in September, over the last 12 months the fund is up +8.76%.
During September 4 out 9 of the fund’s strategies generated positive performance. The best performing strategy for the fund was our global resource long short strategy. During the month global headlines were dominated by escalating trade tensions between the US and China, with the US imposing a 10% tariff on $200 billion of Chinese imports. However, the resources sector held up relatively well and our resources strategy managed to generate positive performance on both the long and the short side of the book.
Our long short Australian market neutral strategy also performed well during the month and generated strong Alpha in a weaker Australian market which saw the All Ordinaries Accumulation Index finish down -1.01%.
The market neutral strategy generated positive returns on both its long and short positions with a significant part of the returns coming from Energy and Industrial stocks. At an individual stock level, the strategy benefited from a position in Jupiter Mines which rose +13% in September. The company declared a first half divided on the back of strong cash generation which was driven by stronger manganese prices.
Additionally, the strategy also benefited from a position in Aurelia Metals which finished the month up +17% as the markets began to apricate the company’s strong cash generation and upside optionality around its recently acquired Peak mine.
The relative valuation of high growth/momentum stocks versus value stocks is now at multi decades extremes. In the short term this has made it harder for our value-oriented managers or managers that have shifted their exposure to value stocks to generate returns. However, we believe this extreme relative valuation will normalise at some point and our managers who own or have rotated to value stocks should benefit from this movement over the medium to long term.
As we have moved into October we have already seen some of the very high momentum stocks sell off sharply. As volatility picks up and the markets begin to price in higher interest rates we believe the fund is well positioned to take advantage of both long and short opportunities relative to long only type strategies.