PERFORMANCE DURING THE BLACK SWAN OF 2020
The BSD team wants to share with You our portfolio strategy and tactics that not only protected our BSD Global Tech Hedge Fund from the recent dramatic stock market downturn, but how we have capitalized on the market turmoil to produce positive returns. We have no ‘crystal ball’ into the future, but our investors count on us to take decisive action in terms of preserving their capital and position them to actually capitalize on whatever future scenarios play out.
The graph above illustrates how the BSD Global Tech Hedge Fund has maintained a stock portfolio with a 20% cash position and a hedging overlay that resulted in a positive outcome so far this year, while the broad market indices cratered. In Q4 2019 and early 2020, a number of our stock positions achieved their respective price targets, which resulted in an overweight cash position. Additionally, your BSD team increased our short equity indices derivatives overlay as the market’s valuation became excessive and the risk of the Chinese coronavirus outbreak threatened supply chains. Initially, we did not extrapolate the coronavirus into a pandemic that would impact the demand side of the world’s macroeconomic equation, but our Nasdaq put options went very deep into the money, which produced the Fund’s alpha.
The BSD portfolio management strategy and tactics have a proven track record of competitive returns, together with a hedging process that limits drawdowns and, as illustrated recently, can generate alpha, even during black swan events. The Black Swan Dexteritas motto – Prosperously navigating unexpected events with great skill and agility – is a credo the BSD team is very proud of.
The graph below, of the BSD Global Tech Hedge Fund’s return since inception, most importantly illustrates the significantly lesser degree of volatility of our Fund versus the major broad market indices; this is so important, because volatility induces emotional reactions which often lead to regrettable investment decisions. The BSD risk management discipline is based on objective criteria (i.e. valuations, technical indicators and liquidity events) and not on subjective criteria (i.e. greed and fear).
Your BSD portfolio management and research team still believes there is a significant probability of further downside stock market risk, as market participants calibrate the macro and micro economic impact of the coronavirus outbreak. The path of the coronavirus stock market correction and global economy hinges, to a large extent, on one big question – can the U.S. and Canada, along with much of Europe and Asia, stem the Covid-19 tide without resorting to China’s drastic quarantines and travel restrictions. The hesitation of Western democracies to adhere to tightening quarantine measures thus far suggests not. The BSD Global Tech Hedge Fund is 80% invested across two dozen tech vendors and tech end-users, with 20% in cash, and a hedge protecting 120% of the stock portfolio. This strategy will protect the Fund from downside risk and if for some unknown reason the market trades higher, the Fund will still benefit, but to a lesser degree than an unhedged stock portfolio.
The bottom line: BSD’s investment forte is finding those tech themes and trends that have long and lucrative runways, while protecting downside risk and limiting volatility with our disciplined risk management process.
Now, more than ever, highlights the absolute necessity to have a portion of your portfolio in an actively managed hedge fund, with a proven track record for generating returns in all types of markets. We strongly encourage you to contact us to discuss allocating your funds to the BSD Global Tech Fund, so that you can join our current investors in protecting your hard-earned money.
If You have any questions, or need any assistance with your financial health, please contact us.
Lastly, and most importantly, your BSD team wishes you good health, to you and all of your loved ones. The coming months will be challenging for all of us, so let us help you to at least alleviate your investment worries.