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Friedberg Global-Macro Fund Up 57% in Q3 – Quarterly Letter
Posted by: CanadianValue (IP Logged)
Date: October 25, 2011 08:27PM

Not a cheery outlook.

Dear Investor,

It gives me great pleasure to report to you on the financial activities of our hedge funds for the quarter ended September 30, 2011.

The Friedberg Global-Macro Hedge Fund and the Friedberg Global-Macro Hedge Fund Ltd. gained 57.2% and 60% for the quarter respectively, bringing their year-to-date gains to 47.6% and 54.4%. More importantly, we have managed once again to move the year-over-year results to the plus side, now showing gains of 32.7% and 45% respectively. (All figures are in U.S. dollars.) The statistics we present are drawn from the larger Friedberg Global-Macro Hedge Fund Ltd., but the comments apply equally to the Canadian version. Newly introduced Ontario government taxes on financial services have significantly affected results, explaining part of the wide performance gap between the funds.

As I write these lines, the fund has lost 18.60% for the month of October thus far, reducing gains to date to 31.40%. While still respectable, these reduced gains are no doubt a disappointment when viewed from their peak attainment. Still, matters need to be put in context. My hope is that if I succeed in properly describing this context, the reader/investor will get a better grasp of the nature of the enterprise and will thus come to better appreciate the gains as well as the retracements of these violent fluctuations.

It’s no news for those who follow markets on a daily basis that volatility across assets and across a wide geographic area has literally exploded in recent months. Standard yardsticks of volatility for U.S. stocks, bonds and gold, for example, have nearly tripled from the lows of the last six months and remain at the highest levels since early 2009 and well above historic levels. Compounding this unpleasant state of affairs is the fact that correlation between all types of assets is extreme. Markets are betting on a binary outcome: either the globe solves its problems (or kicks the proverbial can down the road far enough, like two or three months!), in which case risk is “on,” or we can’t muddle through and we head towards an economic abyss, in which case risk is said to be “off.” In this environment, unfortunately, money managers cannot ply their trade in a prudent manner; that is, they can’t find (buy) positions they like and simultaneously establish others (sell) they don’t like to balance their bets. As a result, they find themselves fully on one side of the binary divide. A manager, convinced as we are that policy-makers continue to fall behind the curve and that events are likely to overtake them and who wishes to take advantage of the scenario, must therefore be willing to suffer the consequences of this extreme volatility.

Link to entire letter:


Stocks Discussed: SPY,
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