Blackheath's Tactical FI Strategy
is a pure Global Macro strategy; focused on
volatility in fixed income futures markets.


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Portfolio
Manager

Levente Mady (since inception, October 2011)

Markets
Traded

Fixed Income options and futures

Investment
Strategy

Discretionary

Dynamic
Hedging

Yes

Minimum
Investment

For Managed Accounts: $50,000 (or multiples of $50,000)

Average Margin
to Equity

15%

Assets under Management

As of July 31, 2017:

Blackheath Tactical FI Strategy: US $6.7 million

FOR MORE INFORMATION ON THIS STRATEGY,
OR TO RECEIVE WEEKLY BOND COMMENTARY EMAILS FROM LEVENTE,
PLEASE CLICK HERE

Blackheath Tactical FI Strategy Composite, Pro-forma Performance*
Net Returns† 


 
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD
2017
-0.53%
0.66%
-2.52%
1.35%
3.15%
1.29%
0.06%
 
 
 
 
 
3.40%
2016
1.73%
3.32%
1.34%
-0.83%
2.68%
-9.65%
-3.55%
5.81%
2.88%
1.58%
-6.07%
3.36%
1.47%
2015
3.84%
6.64%
-5.84%
3.05%
6.01%
-1.06%
-4.37%
-0.91%
6.09%
1.44%
1.85%
0.59%
17.75%
2014
1.23%
0.42%
5.39%
0.37%
4.78%
6.35%
-1.56%
5.09%
1.95%
0.73%
3.13%
2.88%
35.07%
2013
1.80%
4.08%
1.34%
3.51%
-6.52%
-3.87%
3.33%
-0.91%
2.15%
2.68%
3.25%
0.22%
10.98%
2012
4.78%
3.89%
0.97%
-3.56%
-0.33%
6.52%
3.64%
-5.76%
3.70%
4.24%
2.36%
3.88%
26.33%
2011
 
 
 
 
 
 
 
 
 
2.41%
4.61%
8.14%
15.86%

*Starting in November 2015, the track record shows the composite performance of the strategy, calculated using the Only Accounts Traded (OAT) method. From October 2011 to October 2015, (colored background), the performance shown is the proprietary, pro-forma net returns of the strategy, based on the actual trading results as observed in a single, proprietary flagship account traded under the strategy, assuming a beginning trading size of approximately US$90,000. Please note that the results for this period are based on certain assumptions that have inherent limitations, some of which are described herein. The actual broker records of this proprietary account are stated in Canadian dollars (CAD); the month-end account value was converted and restated in USD, assuming the USD/CAD exchange rate as the last price on the last trading day of each month [Data Source: Bloomberg]. Such a currency related assumption, combined with the difference in fee structure from the one assumed for this calculation, can lead to moderate leveraging in the account over certain time periods during the course of this track record. Also, please note that the proprietary account has favourably negotiated trading commissions. Additional details of this computation and calculation of the performance are available upon request.

† Net returns are calculated assuming a fee structure of a 2% Management Fee accrued monthly and a 20% Incentive Fee paid quarterly. Separately Managed Account performance can be higher or lower than the above reported performance of the program depending on several factors, such as commission and fee levels, investment amount, duration, the actual prices achieved, the portfolio composition and government taxes (if any). While the results here are based on pro-forma adjustments assuming the given fee structure, in reality, accounts may have a different fee structure, a different fee payment periodicity, different (higher or lower) commission levels and government taxes (if applicable) which may significantly distort the net performance observed in an actual account. Also, in reality, some managed accounts can be traded with a higher leverage and such leverage changes over time and this could result in significantly different performance in an actual account

FOR MORE INFORMATION ON THIS STRATEGY
OR TO RECEIVE MONTHLY PERFORMANCE COMMENTARY EMAILS
PLEASE CLICK HERE

 

Dr. Andrew Cumming, Portfolio Manager and Managing DirectorLevente Mady, Portfolio Manager

Levente is a Fixed Income (FI) Market specialist with 25 years of experience in the North American interest rate markets.
Before joining PI Financial Corp in 2012, Levente managed multi-million dollar bond portfolios for investment counsel, Union Securities Ltd, where he was a Managing Director from 2009 to 2012. Prior to that, he worked in Toronto as a Fixed Income Trader for major investment dealers such as MF Global Canada (2006-2009) Resolution Capital Inc. (2003-2005) Genus Capital Inc. (1997-2002) Deutsche Morgan Grenfell Canada (1995-1997) and CIBC Wood Gundy Inc. (1990-1994). 
Levente is also licensed for, and has extensive experience in, trading financial futures and options. Combining his fixed income background with his option trading expertise, he focuses on generating superior returns in the US Treasury Bond futures market.
Levente holds an MBA degree in Finance from the University of Toronto. As well, he earned his Chartered Financial Analyst (CFA) designation in 1993.

Eric Ispanovic, Head TraderChristopher Foster, Blackheath CEO and Managing Director

Christopher Foster is a co-founder of Blackheath Fund Management and was the architect of Blackheath Sentiment Strategy.
Between 1989 and 2000 while Christopher was with Friedberg Mercantile Group (FMG) he first became familiar with analyzing crowd behaviour and sentiment indicators, under the instruction of FMG’s Portfolio Manager, Albert Friedberg. He started as a registered representative in futures and futures options contracts, before becoming an Associate Portfolio Manager and developing the genesis of the Blackheath Sentiment Strategy.
From 2000 to 2009, Christopher was with ScotiaMcLeod as an Investment Advisor and Director, Financial Services, as well as a Portfolio Manager in futures and futures options contracts. While at Scotia, he was the advisor for the first account to use the strategy – Blackheath Offshore Limited. In 2009, Christopher left Scotia to start Blackheath with a partner, bringing his innovative managed futures strategy to a wider audience.

FOR MORE INFORMATION ON THIS STRATEGY
OR TO RECEIVE MONTHLY PERFORMANCE COMMENTARY EMAILS

PLEASE CLICK HERE

July 2017 Performance Commentary


Proprietary Pro-Forma Perfomance Net Returns

Monthly Return*

Year to Date*

Since Inception*

0.06%

3.40%

171.05%

 
* These results are based on the NET returns of the strategy. Please refer to the note below for a description of how these returns are calculated. 

The US bond market continued to trade in a narrow range. The Long end of the US Treasury market was practically unchanged for a fourth month in a row as the Long Bond closed out July less than a point below where it started. Bonds spent all month in a very tight three-and-a-half point range. There were no major surprises on the fundamental, political or monetary policy front to knock Treasury Bonds out of their tight range last month. US Treasury Bonds continue to trade extremely cheap versus stocks, and quite cheap versus other sovereign bonds and also against lower rated (junk and emerging market) bonds.

The US Federal Reserve Bank left its policy rate unchanged at its last policy meeting scheduled during the last week of July. The next rate hike was advertised to happen later this year but the short-term interest rate futures are pricing in only one more hike through the end of 2018. The overwhelming majority of Fed officials continue to believe that this latest slowdown is transitory in nature and that the US economy should bounce back to a healthier 2%+ growth rate soon. Meanwhile, the US economy fell short of the magic 2% number both in growth and inflation during the first half of 2017. While the US economic data continues to be mixed at best, the economies in Europe and Canada appear to have gained some momentum. As a result, the brass at the Bank of Canada have raised their policy rate by 25 basis points at their latest policy meeting on July 12 and also indicated plans for at least one more rate hike before the end of the current year. The improved European economy meanwhile has caused the European Central Bank to start discussing the possibility of paring back its Quantitative Easing programs, but there have not been any official plans announced yet.

As bonds remained range bound, we continued with our neutral bias in our option selling strategy – in line with our view that a range trade is likely to persist a while longer. As a result, we plan to continue to be patient and sell puts on dips and calls on rallies but stay involved, in order to generate ongoing positive cash-flow from option decay.

Looking ahead, we expect the range trade to continue with an upward bias. While Central Banks have been unofficially talking about the possibility of tightening policy either through raising rates, quantitative tightening, or both; so far only the US Fed and the Bank of Canada have actually taken clear-cut tightening steps. The Bank of Japan is nowhere close to moving and the likes of the European Central Bank, the Bank of England or the Reserve Bank of Australia have yet to take the first step on the policy tightening path. Meanwhile, implied volatility stayed subdued. While we still want to be in the market earning the decay on the options we sell, we plan to continue to keep our risk exposure at conservative levels until vols rise somewhat.

All the best,

Levente Mady
Portfolio Manager
(for previous months' commentaries, please click here to go to
The Blackheath TACTICAL FI Strategy Blog)

*Starting in November 2015, the track record shows the composite performance of the strategy, calculated using the Only Accounts Traded (OAT) method. From October 2011 to October 2015, (colored background), the performance shown is the proprietary, pro-forma net returns of the strategy, based on the actual trading results as observed in a single, proprietary flagship account traded under the strategy, assuming a beginning trading size of approximately US$90,000. Please note that the results for this period are based on certain assumptions that have inherent limitations, some of which are described herein. The actual broker records of this proprietary account are stated in Canadian dollars (CAD); the month-end account value was converted and restated in USD, assuming the USD/CAD exchange rate as the last price on the last trading day of each month [Data Source: Bloomberg]. Such a currency related assumption, combined with the difference in fee structure from the one assumed for this calculation, can lead to moderate leveraging in the account over certain time periods during the course of this track record. Also, please note that the proprietary account has favourably negotiated trading commissions. Additional details of this computation and calculation of the performance are available upon request.
Note: Net returns are calculated assuming a fee structure of a 2% Management Fee accrued monthly and a 20% Incentive Fee paid quarterly. Separately Managed Account performance can be higher or lower than the above reported performance of the program depending on several factors, such as commission and fee levels, investment amount, duration, the actual prices achieved, the portfolio composition and government taxes (if any). While the results here are based on pro-forma adjustments assuming the given fee structure, in reality, accounts may have a different fee structure, a different fee payment periodicity, different (higher or lower) commission levels and government taxes (if applicable) which may significantly distort the net performance observed in an actual account. Also, in reality, some managed accounts can be traded with a higher leverage and such leverage changes over time and this could result in significantly different performance in an actual account.

Estimates and projections contained herein represent the views of the writer, and are based on assumptions which the writer believes to be reasonable. This information is given as of the date appearing on this report, and the writer and Blackheath assume no obligation to update the information or advise on further developments relating to securities. The material contained herein is for information purposes only. This material is not intended to be relied upon as a forecast, research or investment advice, and is not to be construed as an offer or solicitation for the sale or purchase of securities or as a recommendation for you to engage in any transaction involving the purchase of any Blackheath product. The risk of loss in trading futures contracts or commodity options can be substantial. Investors should carefully consider the risks of investing in light of their investment objectives, risk tolerance and financial circumstances. Important information about Blackheath products are contained in their Disclosure Documents and/or Offering Memoranda.

FOR MORE INFORMATION ON THIS STRATEGY
OR TO RECEIVE MONTHLY PERFORMANCE COMMENTARY EMAILS
PLEASE CLICK HERE

COMMODITY TRADING INVOLVES SUBSTANTIAL RISK OF LOSS.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.