Reporting Hedge Fund Performance

Great investment operations endure the test of time, spanning decades of consistently compounding money. Along these lines, we strongly maintain and attempt to be the same and consistently reach double digits growth on an annual-basis. 

This is Part 5 of a Series. Go to Part 4: Accounting as the Language of Business

The following is a portion of a letter addressing my partners which states, clarifies, and addresses the operating principle behind that private investment partnership (i.e. hedge fund) I began. I would recommend that you start your reading at the beginning.

Noting performance, our aggregate partners’ equity increased 2.82% from its inception on November 22, 2010—the date of approval of our proposed Articles of Partnership and registration with the Securities and Exchange Commission (SEC)—up to 2010’s yearend. This translates to an effective annual rate of return of 26.42% (computed as 2.82% multiplied by 365/39 days).

While this figure may seem stellar, I admit it says nothing of our fund’s future performance; after all, a 39-day start-up performance is hardly significant—great investment operations endure the test of time, spanning decades of consistently compounding money. Along these lines, we strongly maintain and attempt to be the same and consistently reach double digits growth on an annual-basis. Being a local fund invested in firms listed in the Philippine Stock Exchange (PSE), we shall designate the PSE Index (PSEi) as our benchmark which we shall strive to beat yearly; to note, the PSEi yielded 0.34% against our 2.82% for the period of November 22 to December 31, 2010.

While our yardstick, ironically, is dictated by the market on its own terms—since we measure our net worth by our investments’ prevailing market value and report the change as our return—we shall still be more sensitive on the operating realities of our held companies at their level as businesses. There is no guarantee market price will surely follow fundamental business growth; nonetheless, I see no other rationale to justify acquisitions. Continue to Part 6: Acquisition Moves and Exploitation of Market Misalignments