Little Wing Macro: May 2009 review

The portfolio performed well in May, adding 4.5% net of costs, bringing year to date performance to 9.3%.

The majority of gains came from equity and FX, which added 2.2% and 2.6% respectively to the bottom line. Call options on Chinese and UK equities were once again the biggest contributors to performance, up 29% and 13.8% respectively. In FX, the portfolio was well positioned for dollar weakness with short USD and long gold holdings. However, the addition of Norwegian Government Bonds seemed premature as GBPNOK went through the 10.00 mark, falling 5% and costing the portfolio 0.5% on the month.

Rates also cost performance -0.4% as 10 year Gilt yields spiked 25 basis points during the month. On the plus side, short Treasury and index linked exposure offset losses with gains of 6.8% and 1.5% respectively.

A fall in portfolio volatility to sub 30% (currently 24%) allowed more cash to be deployed and cash now accounts for over 30% of assets, its lowest weight to date.