December 2011
The Global Guru Capital Investment Programs fell in December as global markets recorded their seventh loss in eight months. The “Global Gains” Investment Program fell by 3.27% and the “Ivy Plus” Investment Program dropped 0.97%.
“GLOBAL GAINS” INVESTMENT PROGRAM
END TO A TOUGH YEAR
The “Global Gains” Investment Program dropped 3.27% in December, weighed down by sharp drop in the price of gold, positions in Chinese stocks and European banks.
Most positions were flat on the month. The program’s two core defensive positions- gold and emerging markets debt – ended the month mixed. Gold pulled back 7.26%, while emerging markets debt rose 2.08%.
Otherwise, the program’s global focus has hurt its performance throughout the year, as it ended the year down 13.75%. By way of comparison, the MSCI emerging markets index – program’s best benchmark- fell by 25.57% and the MSCI EAFE Index for global developed markets fell 17.54%. U.S managers has it relatively easy in 2011, as the U.S. S&P 500 was essentially flat on the year.
In many ways, 2012 was a reprise of 2008 when U.S. assets- the U.S. stock market, U.S. Treasuries, and the U.S. Dollar – outperformed all global assets. As such, the Global Gains program’s worst investment decision in 2011 was to follow Bill Gross and Warren Buffett and bet big against U.S. Treasuries. The best? A bet on Asia’s Las Vegas that ended the year 51.25% higher.
THE “IVY PLUS” INVESTMENT PROGRAM
FLATISH MONTH BOOSTED BY DIVIDENDS
The fully-invested “Ivy Plus” program ended the month slightly lower, pulling back 0.97%. Monthly returns were boosted by the large number of dividends paid out in December. Overall, the “Ivy Plus” Investment Program dropped 11.71% in 2011.
U.S. markets outperformed their global counterparts yet again, ending the month up 0.36%. Developed markets fell 3.43%, and emerging markets dropped 5.29%.
Fixed income positions were flat for the month, with the exception of High Yield Bonds which jumped 3.27%. U.S. Treasuries rose by 0.22% and Treasury Inflation Protected Securities (TIPS) dropped 0.4%. Foreign bonds fell 0.54%, as the U.S. dollar rally abated.
Commodities traded flat dropped back 2.89%. U.S. Real Estate jumped a surprising 3.7% while foreign real estate lost another 7.04%.
The long-short hedge fund strategy was flat, recording a loss of 0.41%. Global macro fell back 1.79%.
Private equity dropped another 1.96%. Timber dropped by 2.42%
INVESTMENT OUTLOOK
TRUST BUT VERIFY
It was a year two halves in 2011. The first four months of the year were broadly positive. But held hostage to continuous “headline risk” from Europe, markets have been down the last seven months out of eight.
The second half of 2011 was one of the most challenging markets of the past decade,as the sharp sell-off in August recalled the dark days of September 2008. And even though markets rose in Q4, the traditional year-end rally did have as much kick as usual.
U.S. consumer sentiment and economic fundamentals are improving and investors are returning to the relative stability of the U.S. The more uncertain the environment, the better U.S. assets should perform. At the same time, as risk appetite increases, foreign stocks tend to perform the best. “Fear” can turn into “greed” quickly, as the sharp upward correction in October suggested. It looks like another challenging year ahead.