Below are excerpts from the quarterly report of TwinPeak Capital, a private family office we manage.
June 30, 2016
TwinPeak Capital NAV (the “TWIN”) increased 7.10% versus a 8.45% gain for the iShares Core MSCI Pacific ETF (the “MSCI Pacific”) for the quarter ending September 30, 2016. The following table compares the TWIN’s unaudited performance (after fees) with that of the MSCI Pacific for various periods ending September 30, 2016.
For the quarter ended September 30, 2016, the Company underperformed the iShares Core MSCI Pacific ETF (the “MSCI Pacific”) by 1.35 percentage points. From inception, the Company outperformed the MSCI Pacific by 11.22 percentage points on a cumulative basis.
At September 30, 2016, the value of a SG$10,000.00 hypothetical investment in the TwinPeak Capital at its inception is worth SG$11,179 compared to SG$10,056 for the MSCI Pacific.
The Global Economy remains volatile. In the last quarter, volatility occured due to the Brexit. While the Brexit vote outcome was certainly unexpected, the precipitous reactionary sell-off was quite surprising, considering the fact that Brexit itself had been a well-known issue for a while. Now that the financial markets have recovered quickly, on hindsight, it now appears that investors might have initially overreacted to Britain’s decision to leave the European Union. In any event, it is very difficult to assess the impact of Brexit on the Global Economy at this time because it would depend on the terms and conditions in which Britain leaves the European Union. This unwinding process is likely to take some time and any hasty conclusion may seem imprudent.
In this quarter, uncertainty only changes its form, with the latest source of uncertainty coming from Deutsche Bank. The U.S. Justice Department’s threat to fine the firm USD 14 billion has sent the stock price to record lows amidst concerns over the bank’s capital adequacy. As one of the world’s largest banks, there is risk that any contagion may ripple across global financial markets, not unlike the Lehman Brothers in 2008.
Despite all the negative perspectives on the Global Economy, we continue to witness a divergence of the equity valuation and the underlying economy. The S&P 500 index continues to move up despite the lacklustre performance by the U.S. economy. Perhaps the unprecedented magnitude of quantitative easing by various Central Banks has inadvertently created a worldwide asset price bubble. For example, most of the newly created money was invested in financial assets rather than productive assets, resulting in the valuation level that may not be justified by fundamentals. This may also explain the rapid recovery by the financial markets from the Brexit sell-off.
Macro-economic forecasts remains beyond our expertise. We remain aware but agnostic towards global market conditions. Since the inception of TwinPeak Capital, every quarterly market commentary has been marked with pessimism and uncertainty. Nothing has changed and we do not expect it to be different anytime soon.
Investors interested in learning how to achieve such results may attend our upcoming courses, where we equip investors on the technical knowledge to go about investing in equity markets. Alternatively, investors may check out our screener service that we offer, which is the exact same shortlist we use to pick stocks for our market-beating portfolio.