Dipsea Capital Fund LP
November 2016 Fund LP Commentary:
Once the uncertainty of the election passed, the market responded with a broad rally through the month of November. The S&P 500 index increased 3.4% during the month and ended the first 11 months up 7.58% for the year.
The Dipsea Capital Fund had its fourth consecutive positive month and generated a return of +.92%, after fees, for November. Year-to-date, the Dipsea Capital Fund is up 2.78%.
Our observations entering November supported a market landscape which favored a broad rally because investor sentiment was so profoundly skewed. At the time, numerous sentiment surveys showed broad bearish sentiment, which frequently is a contrary indicator.
As we finished November, we now observe the opposite scenario. According to the weekly survey performed by the American Association of Individual Investors, 50% of survey participants are now bullish, versus 24% at the beginning of the month. We are now biased towards a more cautious stance.
One other anecdotal observation on sentiment we are observing: Current conventional wisdom is now skewed towards the futility of assets being actively managed. Low cost index funds are all the rage. Although our fund management efforts during the last 10 years have outperformed the indexes, most funds’ performance has not. Because we believe this assumption is now widely embraced, and since we project higher average volatility in 2017 as interest rates increase, active management should provide a more respectable showing going forward.
Again, these observations don’t impact the day to day adherence to our rule based methodology, but we are mindful, nonetheless, of these trends. As always we embrace our effort with the goal of continuing to generate consistent, uncorrelated returns for our investors.
Please accept Gregg’s, Eddy’s, Kurt’s and my appreciation for the trust you place in us as a conscientious steward of your, (and our), capital.