Dear Limited Partner / Investment Committee,
We are writing to inform you that the profit /loss for October 2012 was -6.86%. These recent results put our year to date gains at 3.94%.
We are obviously quite disappointed with this result. More over, it is increasingly frustrating due to the fact that no one main cause can be attributed as the driver of this month’s losses. If there was some single, out-of-the-blue tail event, that might be more intellectually more comforting. However, every major aspect of our models lost money moderately. So scratch that last thought; in this case correlation was in fact causation for the large dark red numbers on our PnL. While we do not believe this is a structurally long-lasting problem, both our position and portfolio-level risk controls are fully engaged. As a result, our exposures have been very significantly reduced.
In other news, we have very little information or insight to report. The markets still await the election outcome and the much-discussed fiscal cliff, with no resolution to either (although we are only T-36 hours from election day as I write this). We’ll spare you our personal opinions and forecasts as we think they are likely not worth the breath they would be spoken with at the moment. Furthermore, we hope many others would do the same! (On a similar note, see this great post from Marginal Revolution – HT: @Dutch_Book for the link).
We are looking forward to a new month, hopeful to reverse some of these recent losses and to end 2012 on a more positive note. However, as mentioned above, rest assured our positioning is much smaller and our risk tolerance best categorized as “skittish”.