"In 1990, I went to Memphis and worked for Paul Tudor Jones' uncle, Billy Dunavant.
His style was to 'find asymmetric investment opportunities and when you
do, bet big.
And when you don't find those opportunities, don't bet',"
The hard part of that formula is the "Don't bet"
For the professional it can mean your job to wait for what Buffett refers to as the perfect pitch.
For retail it's FOMO until the frisson becomes unbearable and they just have to get a bet down.
From Opalesque, August 20:
B. G., Opalesque Geneva:
The Arnott Opportunities Fund (Cayman) is up 16% YTD (to August, Month-to-Date). It has annualised more than 22% since May 2013, compared to 6.9% for the MSCI, according to documents seen by Opalesque. That good fortune comes from a strong focus on asymmetric investment opportunities.....MORE
The fund went through the first months of 2020 by focusing on macro drivers for risk and opportunities. "We watched the risks of COVID unfold in January and reduced our small-cap exposure aggressively," says an Arnott presentation overviewed by Opalesque. "Then we positioned very short in our hedge book and financials into March and respected the power of liquidity the Fed provided in April. We lifted our index hedge and covered short financial positions no longer at risk."
Since February, a global total of $3.9 trillion (6.6% of global GDP) has been magically created through quantitative easing, it continues. "We are witnessing the Great Monetary Inflation (GMI), an unprecedented expansion of every form of money, unlike anything the developed world has ever seen. There is no sign of it ending, and we expect more in September. And now Congress has become an additional critical player in driving money supply with its fiscal programs. This will have long-lasting consequences that will provide plenty of pitfalls and opportunities for many years to come."
Strategy
The strategy, which started in 1999, is equity long/short with a macro overlay. The universe is global equities. The portfolio will typically have 40 to 70 positions and occasionally trade global futures and options. The strategy aims to identify trends and opportunities using value investing principles and capture price oscillations around the underlying trend using trading skills.
The investment approach centers around finding asymmetric themes; investing in the best stocks within those themes; focusing on macro drivers for risk and opportunity; and generating an asymmetric return profile.
An asymmetric return is the set of possible results of an investment strategy where the upside potential is greater than the downside risk.
"In 1990, I went to Memphis and worked for Paul Tudor Jones' uncle, Billy Dunavant. His style was to 'find asymmetric investment opportunities and when you do, bet big. And when you don't find those opportunities, don't bet'," says founder and portfolio manager Kenny Arnott. "That became the mission statement of Arnott Capital. And our results prove we have not deviated from that mission since I founded Arnott Capital in 1999."
Arnott's maximum drawdown has been -9% from high-water mark (the highest peak in value that an investment fund has reached) since 1999, vs. the market's -50%.
Mr. Arnott will present in the upcoming investor workshop webinar, The keys to asymmetric returns, on Tuesday 1st September at 10 am EST.
Themes
The current long themes are uranium, gold, "Connecting the future", Hong Kong, and agriculture. The short themes are core shorts, crowded defensive longs, August reporting season, equity index futures and puts...
