Review and Outlook: As we discussed at our investor presentation in January, we believe the threat of a severe global slowdown receded as a result of the European stability mechanisms announced late in 2011, and so the global economy – and in particular, the US economy – is in a growth trajectory notwithstanding certain persistent "tail risks". The First Quarter was a benign environment for our value‐oriented stock‐picking style, and our analysts found interesting opportunities everywhere, resulting in positive performance across most asset classes, sectors, and geographies.
Our mortgage portfolio was up ~6.5%, recovering nicely from a dip in the Fourth Quarter of 2011. Corporate credit gained 12% for the year through March 31st, on the strength of investments made during the credit market sell-off in October 2011 which were primarily near‐term, cash‐returning situations with small downside risk and a quick payday. Long equity positions were up 12.4%, roughly the same as the market, despite a loss in Yahoo! (YHOO
), our largest equity position. We generated our greatest profits in Financials, Consumer, and Healthcare, losing money primarily in our Special Situations short book. From a regional perspective, Europe had a 20% return on average exposure while the US was up 12%. Gold was up ~5% on our average exposure of 5.5% of AUM. Continue Reading »