Dear client or friend of Vailshire Partners LP hedge fund,
The third quarter of 2021 was volatile across most asset classes. After a solid performance in July and August, September ended (as expected) with a thud. Read on to see how our fund performed, as well as our outlook for the coming months!
Current Market Conditions
From Indecisive to Decisively Bullish
The third quarter of 2021 was akin to a rollercoaster ride… with many exciting dips and turns. But, in the end, we ended up approximately where we started. While this can be unsatisfying for some, we used this opportunity to bolster our positions for an expected surge in select asset classes for 4Q 2021.
Healthy returns of +1.32% and +7.28% in July and August were tempered with a -9.43% drawdown in September for Vailshire Partners LP investors. This combination resulted in a 3Q 2021 total (unaudited) performance of -1.55%.
The poor returns in September were not unexpected, given that this is the worst month for both US stocks and bitcoin, historically-speaking. Both of these asset classes have actually experienced negative average returns during the month of September, and this year was no different. Yet despite the lackluster 3Q performance, we used this as an opportunity to bolster our aggressive positions for what I expect to be a very solid fourth quarter.
It should be noted that our (unaudited) trailing 12-month performance of +117.37% continues to far outpace that of the S&P 500 total return (+28.09%) by a massive +89.28%. In addition, our three- and five-year annualized performance continues to substantially outpace the S&P 500 total returns, as illustrated in the table below.
Investing wisely in innovation and world-improving technology inevitably brings intermittent down months and quarters (and even years!) but, done well, tends to lead to life-changing gains over the medium-to-long term.
While the last 5-6 months have been choppy and somewhat unsatisfying, I expect the coming months to be very fruitful for our portfolio holdings. Two quarters of patiently sowing seeds will, I believe, soon lead to a plentiful harvest.
I am thankful to my fellow investors for sticking with Vailshire Partners’ systematic, full-cycle investment process throughout each of these seasons.
Current Market Conditions
We are only days into the fourth quarter of 2021 and the mood has already decisively changed. Based on my research, both inflation and GDP are mildly accelerating. In addition, Covid cases–tragic as they are–are finally starting to decelerate across the country.
Overall, important indicators are moving from bad to less bad. This is generally good news for us as investors.
The combination of accelerating inflation and GDP generally implies a “risk on” environment for institutional investors. This means that long-dated US Treasury rates will likely increase and certain stock sectors should perform well, including energy, financials, and technology. Commodities also tend to appreciate in conjunction with rising inflation.
Finally, bitcoin and related assets historically perform exceedingly well in this environment. Larger than normal allocations to this burgeoning sector is a must, as I have previously explained.
4Q 2021 Investment Strategy
Making Hay While the Sun Shines
Given the above-mentioned underlying market conditions, we have used the expected September doldrums as an opportunity to increase our positions across “risk on” assets.
Similar to 2020, when we experienced a very large September drawdown in our fund, the 4th quarter brought us a market-crushing performance; including October, November, and December returns of +17.37%, +34.77%, and +28.93%, respectively.
While past performance is not indicative of future returns, I am highly optimistic that we are once again positioned for very satisfying results in the coming months.
Vailshire Partners’ full-cycle, systematic investment strategy gives us confidence to be aggressive when the sun is shining, and defensive when dark clouds are on the horizon. Today, as in 4Q 2020, the sun is once again shining.
I am optimistic about our future prospects… I hope you are, as well.
Once again, as Vailshire’s founder and portfolio manager, I remain honored by those of you who have joined me within the fund since its humble inception in early 2014. I do not take lightly the trust which you have placed in me and Vailshire’s investment strategies.
For current non-clients: If you would like to discuss what Vailshire’s innovative investment strategies can do for you and your family, please do not hesitate to reach out to me personally (jeff@vailshire.com). This is not a solicitation to invest but, rather, an invitation to inquire more.
Living well and investing wisely with you,
Jeff Ross, MD/MBA
P.S. I was recently honored to be interviewed by legendary trader and personal friend, Peter Brandt, on Real Vision. Friends, family members, and colleagues are welcome to watch the 50-minute interview on Bitcoin, macroeconomics, and my transition from medicine to hedge fund manager by using this link.