Excerpts from the May letter (thanks to a disgruntled reader who would rather remain nameless):
The RIEF strategy's preference for low volatility has been contrary to the voracious appetite for volatile stocks that has persisted for the past two months. This high volatility rally, which can hardly last forever, is at the root of our dismal performance.
I love the term "can hardly last forever." It only needs to last two minutes longer than you can stay solvent, of course.
Of course it is precisely this predilection of RIEF that helped us avoid much of last year's pain. While our recent reversal has erased a large fraction of last year's relative gain, we are still ahead of the index, net of fees, by more than 9% on a 12-month rolling basis and 3.60% annualized since inception, each with a volatility roughly 60% that of the S&P*. We remain confident that RIEF's portfolio will continue to provide higher long-term return and lower volatility than traditional long-only investing, while, at the same time, serving as an effective diversification for portfolios with large exposure to traditional long-only managers.
Translation: We were short vol. Sort of like LTCM, but not really.
We certainly understand our clients' discomfort at having to withstand a performance onslaught during an extreme market rally, but we believe patience during this period will be soundly rewarded. In order to address your concerns we are scheduling a client conference call for RIEF investors next Wednesday, May 13th at 1:00pm EDT, where I, together with senior researcher David Lippe, will discuss performance and answer investor questions. Details for this conference call and playback instructions are available on our website: www.renfund.com.
So it was a scheduled call. Ah ha!
And the goods:
April / YTD
Onshore: -9.38% / -17.31%
Offshore: -9.47% / -17.61%
Onshore: -9.25% / -16.86%
Offshore: -9.35% / -17.17%
Onshore: -8.64% / -16.95%
Offshore: -8.79% / -17.25%
Onshore: -8.33% / -16.86%
Offshore: -8.51% / -17.17%
Returns are for continuing investors.