To: Viking Investors
From: O. Andreas HalvorsenPerformance
Our second quarter performance was a loss of 5.0% for VGE and a loss of 11.9% for VLF net of all fees on a composite basisOn an unlevered basis, VGE’s long portfolio was down 11.2% and the short portfolio was down 10.3%, yielding a long-short spread of negative 0.9% (see the attached Base Case Analysis). In the quarter, five long positions cost us 0.5% or more while no short contributed an equal amount.
We are greatly disappointed in Viking’s returns both on an absolute basis and relative to the indices. We do not blame factors outside of our control, but acknowledge that changes in the global macro-economic, political, and regulatory environment; a broad-based fall in stock prices around the world; and unusually high levels of correlation among these prices have increased the degree of difficulty in generating a profitable long-short spread. We are paid to deal with such challenges at all times and are in a business that requires hard work and consistent processes every day. When the market gives us a disappointing score for our efforts, we examine our results and our methods to ascertain whether we need to make adjustments – this is the Viking way. Rest assured that our objective remains to achieve maximum capital appreciation commensurate with reasonable risk, and we remain firmly dedicated to meet this goal. In light of this, we have engaged in a thorough examination of our results.
