Atticus European Fund's September performance letter to investors:
Positioning and PerformanceAfter the US mortgage crisis started about one year ago, I was of the opinion that while the
housing correction would result in a slowdown in US growth, global GDP growth would show the same resilience as in previous financial crises. I therefore positioned the fund for exposure to global growth, with thematic exposure to metals, mining, and energy sectors,
among others. The European Fund started the year at exposure levels of 178% gross long
and 95% net long. We consistently communicated this opinion and positioning to our investors.
This judgment (of a mild, mid-cycle US slowdown) has now obviously proven to be incorrect, resulting in significant losses for our fund. The European fund is down 43.5% year to date. I regret and am intensely disappointed by this performance.
As the crisis worsened and investor confidence in global growth deteriorated significantly, our investments in mining, energy, exchanges, emerging markets banks, luxury goods and real estate all contributed to negative performance. Resource stocks which appeared cheap to us at 7 or 8x trailing p/e are now trading as low as 3.5x trailing p/e in anticipation of a potential slowdown in demand and earnings. The valuation arbitrage has completely broken down, with many attractively valued stocks now trading on speculation about liquidity flows from hedge-funds and other institutional investors, and without any correlation to their more expensive peer companies.
What We Have Done
While I was late to perceive the magnitude of this crisis, I have taken several steps to protect the interests of all investors by reducing exposures in the portfolio. Through July, even as I believed in the "correction" scenario and maintained net exposure in excess of 80%, I nonetheless reduced gross exposure. In late August, I initiated further reductions in both gross and net exposure, which were substantially accelerated in September.
Today, the European Fund stands at 55% long and 58% short, for net exposure of -3%. Selected positions have been substantially or entirely sold, with a particular focus on our less liquid positions.
Some of our selling took place in difficult market conditions. While therefore "booking" certain losses, the collective selling has allowed us to regroup amidst this clearly extraordinary time. While in hindsight I wish I had made the decision to sell sooner, I am glad that it is now done. The values of many of the names we sold have continued to deteriorate materially following our reductions.
In the past, several factors including exceptionally high conviction in certain themes have
generated common positions between the European Fund and the Atticus Global Fund. However, for most of 2008, the only significant overlap between the two funds has been the long-term investment in Deutsche Boerse AG. As you know, due to our activist stance this position has been designated (side-pocketed) as a long-term core holding that we have no plans to sell for the foreseeable future.
Capital and Operational Stability
We have the liquidity and capital structure to weather the current storm. Based on long-term planning and proactive management, our capital and counterparty arrangements have provided stability in this challenging environment. At all times we strive to maintain our ability to meet maximum possible fund liquidity needs, including redemptions, for upcoming quarters. As communicated in last month's data report, it would take fewer than five trading days to meet maximum possible redemptions through year end. Such a hypothetical scenario would - by definition - eliminate all quarterly capital from the fund, extending the average duration of the remaining capital and further enhancing capital stability in subsequent quarters.
Today, more than 50% of our NAV is in U.S. Treasuries and cash held at J.P. Morgan and Bank of America, or in securities held at State Street Bank in a segregated custody account. Less than 1.5% of our assets are with independent broker/dealers.
Our Plans Going ForwardWe retain our research-driven, value-focused investment style, and are working diligently to identify future investment opportunities. However, in the immediate current environment, I believe it is prudent to maintain our critical focus on capital preservation and liquidity. If we see a climactic sell-off in the market or a stabilization of credit conditions and growth prospects, then I will be inclined to raise our risk appetite once more.
I am optimistic that we have both the skill-set and the mind-set to identify opportunities from here. We also have a configuration and capital structure that will allow us to move
quickly as opportunities arise. Collectively, I and my team are the largest investors in the European Fund. I understand personally the frustration that our year-to-date results generate and I share your disappointment. But I will continue to execute our strategy, apply what we have learned, and make the judgments I believe are necessary to generate value for the fund.
Thank you for your continued support,David Slager
Vice Chairman
Portfolio Manager - Atticus European Fund
Posted by guest , Oct 06, 2008 3:29PM
Images
by Tyrone Green
Dark and lonely on a summer's night.
Kill my landlord. Kill my landlord.
Watchdog barking. Do he bite?
Kill my landlord. Kill my landlord.
Slip in his window. Break his neck.
Then his house I start to wreck.
Got no reason. What the heck?
Kill my landlord. Kill my landlord.
C-I-L-L my land lord!
Posted by guest , Oct 06, 2008 3:29PM
Money? What money?
Posted by guest , Oct 06, 2008 3:30PM
tl;dr
Posted by guest , Oct 06, 2008 3:31PM
The guy who wrote and signed that letter need to be be sued. I feel for the people who lost their money.
They could have done better hiring a monkey (or their pet) to run their funds. At least pets and monkey will not require fees, and pets are nicer to be with.
http://stocksuniversity.blogspot.com
Posted by guest , Oct 06, 2008 3:31PM
The guy who wrote and signed that letter need to be be sued. I feel for the people who lost their money.
They could have done better hiring a monkey (or their pet) to run their funds. At least pets and monkey will not require fees, and pets are nicer to be with.
http://stocksuniversity.blogspot.com
Posted by guest , Oct 06, 2008 3:33PM
how about just atticus'.
Posted by guest , Oct 06, 2008 3:35PM
Oh, yeah? Vanessa, let's talk about class for a minute, alright? Here's you and Giorgio in the guest room. A little classy, isn't it? Here's you and Giorgio in the rumpus room. Another classy one, huh? Ooh, this one, I can't figure out. There's you, there's Giorgio... What's with the midget over here?
Posted by guest , Oct 06, 2008 3:38PM
the revolution will not be televised.
Posted by guest , Oct 06, 2008 3:38PM
Jesus, they got fucked hard
"Today, more than 50% of our NAV is in U.S. Treasuries and cash held at J.P. Morgan and Bank of America, or in securities held at State Street Bank in a segregated custody account. Less than 1.5% of our assets are with independent broker/dealers."
It's like someone got their ass by the neighborhood bully and is scared to go outside
Posted by guest , Oct 06, 2008 3:38PM
Thanks for the KY, now we can hopefully prevent our asses from bleeding...
Posted by guest , Oct 06, 2008 3:43PM
Bess, is that what you had leftover from the wedding?
Just sayin'....
Posted by guest , Oct 06, 2008 3:44PM
Bess, I've got $500 in twenties, a case of KY, and some really great ideas.....
Posted by Phobos , Oct 06, 2008 3:45PM
"Grandfather, would you like to take us fishing, and tell us life lessons and stories about your childhood?"
"I've got a better idea: why don't you boys go dig a hole, and I'll get another beer."
"Someone didn't love you enough when you were little, did they?"
"Good call. Here, that's worth a nickle."
Posted by guest , Oct 06, 2008 3:45PM
Bess, it looks like you are no stranger to using KY to spice things up.
Posted by guest , Oct 06, 2008 3:47PM
@ 12, didn't think I'd see a lyrics from the National paraphrased on Dealbreaker
Posted by guest , Oct 06, 2008 3:48PM
these fund letters make me feel...how about less dumb.
Posted by guest , Oct 06, 2008 3:52PM
If the gods are fucking you, you find a way to fuck them back. It's Baltimore, gentlemen; the Gods will not save you.
Posted by guest , Oct 06, 2008 3:53PM
So you're paying 1 and 20 for someone to manage Treasuries? That's great work if you can find it.
Posted by MarshallStack , Oct 06, 2008 3:53PM
I prefer natural lubrication.
"None of us in the investment biz should ever forget how to start up that lawnmower."
Posted by guest , Oct 06, 2008 3:53PM
That's my girl! She's one kinky little mofo. The highest of highs and the lowest of lows as a journey back to my mean of reality. Maybe now you guys can begin to understand why I suffer from stockholm syndrome.
I bought you a new pair of stilettos.
Love ya Bess
SPODE
Posted by guest , Oct 06, 2008 3:56PM
I swear to God, I have over 200 sworn personnel and I will free them all up to brutalize every one of you they can. If you're on a corner in my district, it will not be just a humble or a loitering charge. It will be some Biblical shit that happens to you on the way into that jail wagon. You understand? We will not be playing by any rules that you recognize.
New mission statement for the SEC?
-- Commander Bear
Posted by guest , Oct 06, 2008 4:01PM
You know the difference between me and you? I bleed red and you bleed green. I look at you these days, String, you know what I see? I see a man without a country. Not hard enough for this right here and maybe, just maybe, not smart enough for them out there.
-- Avon
Posted by guest , Oct 06, 2008 4:02PM
Hey 15,
Fuck me and make me a drink...
Posted by MarshallStack , Oct 06, 2008 4:02PM
How did they close this pig over 10,000?
Was that our $700 billion at play?
Posted by blndebnker , Oct 06, 2008 4:14PM
"This is what happens when you fuck a stranger in the ass!"
Posted by guest , Oct 06, 2008 4:17PM
Has anyone got a nice explanation for what happened in the last hour of trading today? How did the markets rebound like that?
Posted by guest , Oct 06, 2008 4:18PM
September performance updates for Renaissance Medallion and Tudor:
http://www.marketfolly.com/2008/10/more-hedge-fund-performance-numbers.html
Posted by guest , Oct 06, 2008 4:21PM
26, G8-coordinated global rate cut rumor.
September performance updates for Renaissance Medallion and Tudor:
http://www.marketfolly.com/2008/10/more-hedge-fund-performance-numbers.html
Posted by guest , Oct 06, 2008 4:21PM
got to be a lot of short term trades looking to pick up a couple on a short rebound tomorrow in europe and here
Posted by guest , Oct 06, 2008 4:34PM
dead
cat
bounce
Posted by guest , Oct 06, 2008 4:39PM
Has anyone got a nice explanation for what happened in the last hour of trading today? How did the markets rebound like that?
Posted by guest , Oct 06, 2008 4:40PM
Has anyone got a nice explanation for what happened in the last hour of trading today? How did the markets rebound like that?
Posted by guest , Oct 06, 2008 4:46PM
i dunno but 10 yr didnt budge on +3% rally in the S&P. fishy...
Posted by guest , Oct 06, 2008 6:14PM
Do they get a reach around at least? Poor form.
Posted by guest , Oct 06, 2008 6:28PM
BE
KY jelly plus super size, long lasting Trojan, you turn me on
Posted by guest , Oct 06, 2008 6:28PM
BE
KY jelly plus super size, long lasting Trojan, you turn me on
Posted by guest , Oct 06, 2008 6:29PM
BEss!
KY jelly plus super size, long lasting Trojan, you turn me on ..really, really hard.
Posted by michange , Oct 06, 2008 6:46PM
Fed buying back BofA, GS, etc shares?