As we continue to navigate the rollercoaster of global markets, I’m excited to bring you an update from one of my partners, who has been successfully steering through the alternative investment universe for years. In this update, he shares his latest strategies and insights designed to help investors not only survive but thrive, no matter what surprises the markets throw our way.
While traditional 60-40 portfolios have performed better this year, aided by bond market returns, his focus has been on managing cyclical and interest rate risks within the long-short portfolio. He has significantly reduced exposure to commodities and cyclicality, shifting towards sectors that offer a more stable risk profile.
Despite recent market volatility, he has maintained a controlled risk environment. The portfolio’s losses, when they occurred, were gradual and limited in scope. This reflects the effectiveness of his risk controls and a balanced approach to growth and risk management.
In recent months, he has made a strategic allocation shift towards healthcare, now representing approximately 12% of the portfolio. This move was driven by the opportunity to invest in undervalued stocks with positive catalysts. While popular names are heavily owned by global funds, he has sought more defensive plays.
Notably, he has invested in German healthcare companies trading at attractive valuations. He also holds positions in a major US pharmaceutical company trading at seven times earnings. The company is expected to receive approval for its new schizophrenia drug, which would be a significant positive catalyst.
In terms of commodities, the fund has concentrated positions in three of the largest gold mining companies globally. While copper miners continue to trade at high valuations due to anticipated demand from the energy transition, he remains skeptical of the strength of this narrative, particularly given the slowdown in Chinese construction.
Therefore, he will maintain a short position in copper miners and is long on gold miners, which offer more attractive valuations and dividend yields.
This positioning reflects his view that geopolitical issues and the potential for dollar asset confiscations are supportive of gold as a store of value. Gold remains a liquid and stable investment, and he expects it to perform well in the current global environment.