2018 Performance
Dear Investor,
We are pleased that 2018 was a year that provided superior performance for our Tactical Asset Allocation strategies, relative to the S&P 500, MSCI ACWI as well as the Credit Suisse Hedge Fund indices. Our typical 2018 annual returns were in the +3-5% range for our GTAA as well as USTAA strategies.
Our managed separate accounts also posted a positive to slight negative annual performance, of course depending on individual stock position risks, nevertheless ahead of the S&P 500 as well as the MSCI ACWI indices. I am sure your individual annual Portfolio Analyst reports (sent to you in PDF via email) and our subsequent discussions with you should provide more clarity.
December performance saved the year. We were rather bearish on US equities in early 2018, and the last quarter of the year provided the much needed validation of our bearish outlook. Notably, we under-performed the S&P 500 for the first three quarters, but the last quarter out-performance alone offset this.
Stop losses in our managed accounts helped us foster a better but still negative performance in October 2018, compared to our typical (less-hedged) TAA strategies. Managing downside risk and deliberate shifting of assets to gold, bonds and the US dollar helped our case in 4Q 2018. In hindsight, shorting US equities may have helped returns more. However, our allocation to the Consumer staples and utilities sector, which still provided relative out- performance but nevertheless negative performances, causing overall portfolio returns to be less stellar, that is, single rather than double digits.
As always, thanks for your trust in us and wish you a Happy New Year!!!
Best regards,
Sri Nagarajan
Managing Partner