Gondor Capital's Hedge Funds Post Strong Gains

Portfolio manager says market will struggle the rest of the year

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New York-based hedge fund firm Gondor Capital Management maintained its strong performance in the first quarter as its funds, the domestic Gondor Partners LP and the offshore fund Gondor Funds LTD, posted strong gains, outperforming their benchmarks.

In his monthly report to his investors, Gondor Capital Portfolio Manager Vincent Au said that Gondor Partners LP gained 7.93% while Gondor Funds LTD returned 7.29% in the first quarter, beating their benchmarks with the HFRI Equity Hedge gaining only 3.62% during the same period.

Month to date, Gondor’s funds also beat the average hedge funds with the onshore Gondor Partners reporting 1.41% and the offshore Gondor Funds expanding 2.18% in March. The HFRI Equity Hedge climbed 0.64% last month.

Au commented, “The performances of the funds were continually anchored by investment selection and the discipline of the strategy itself. I am though cautious about valuations overall as I am hard pressed to find any sectors that are undervalued. I believe caution is warranted and discipline to adhere to my investment strategy and a strict focus on fundamentals more crucial at this point.”

Since its inception in May 2013, Gondor’s onshore fund has generated a cumulative return 77.20% compared to HFRX Equity Hedge which returned 7.03% and the Barclays HFI which posted 19.20% during the same period. The Gondor Funds LTD has a cumulative return of 47.54% since its launch in July 2013, while the HFRX Equity Hedge and the Barclays HFI posting 8.20% and 19.99% in the same period.

Both funds were included in Preqin’s Top Performing Relative Value Strategies Hedge Funds for 2016 as Gondor Partners closed the year up 26.53% (1.64% in December) and Gondor Funds was up 26.85% (1.78% in December).

Financial markets to struggle the rest of 2017

Au added that while geopolitical concerns have been brushed aside the last few years by the financial markets, the issues today are more susceptible to a Black Swan occurrence should the outcome not be remedied properly.

He believes the market would face stiff challenges in the remainder of 2017.

“I continue to believe the markets will struggle the rest of the year to justify the expansion of the price-earnings (P/E) multiple as well as the valuation of individual companies,” Au stated, adding that “there will be periods of bullishness only to be met by periods of bearishness. Disappointments on the earnings front will be met harshly by the markets and earnings beats will be met with euphoria. Thus, the movements on either side might be more exaggerated than normal.”

However, Au said he embraces the sideways trading of the markets and the bouts of volatility. He added, “Valuation almost never matters on the way up but almost always matters on the way down.”

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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