Crescat Capital May 2022 Performance Estimates

Jun. 09, 2022 7:08 AM ET
Crescat Capital profile picture
Crescat Capital
388 Followers

Summary

  • Crescat is a global macro asset management firm. We develop tactical investment themes based on proprietary value-driven models. Our mission is to grow and protect wealth by capitalizing on the most compelling macro themes of our time.
  • Crescat Capital’s May performance was negatively impacted by the downturn in the precious metals markets.
  • We believe long-term inflation expectations are still too low and will turn back up again soon.

Pure gold ore on old wooden floor

Oat_Phawat/iStock via Getty Images

Dear Investors:

Crescat’s May performance was negatively impacted by the downturn in the precious metals markets. The pullback was caused by declining medium and long-term inflation expectations during the month. This was all due to continued market apprehension over the Fed’s planned interest rate hikes.

General market perception today and aversion to precious metals, in our opinion, is no different than it was during the “inflation is transitory” barrage that the Fed and Treasury gave the world over a year ago. Policy officials got it totally wrong then, which they now admit. However, the market bought into the “Fed speak” then, and it is buying into it again today, as if its current tightening posture will have any influence at all in bringing down inflationary pressures on the supply side of the commodity markets. It won’t because the Fed’s polices do not stimulate commodity inventories, the core inflationary problem today. In fact, raising interest rates is likely to have the opposite effect because it makes the cost of capital for investment in new commodity production higher. The Fed was powerless to stop long-term structural inflationary pressures then, and it remains just as powerless today.

We believe long-term inflation expectations are still too low and will turn back up again soon.

chart: pullback in long term inflation expectations overdone

We furthermore expect our precious metals performance to turn back in a material way soon, as commodity inflationary pressures continue to exert themselves in a persistent manner.

chart: commodity to equity ratio

Please see the macro case for the above statements and our positioning across Crescat in our recent research letter.

Net Performance Since Inception

table: Net Performance Since Inception

Sincerely,

Kevin C. Smith, CFA, Member & Chief Investment Officer

Tavi Costa, Member & Portfolio Manager

This article was written by

Crescat Capital profile picture
388 Followers
Crescat is a global macro asset management firm. Our mission is to grow and protect wealth over the long term. We deploy tactical investment themes based on proprietary value-driven equity and macro models. Our goal is industry leading absolute and risk-adjusted returns over complete business cycles with low correlation to common benchmarks. We apply our investment process across a mix of asset classes and strategies to assist with each client’s unique needs and objectives:Crescat Global Macro: Our flagship hedge fund invests long and short around the world to take advantage of opportunities in any asset class. The strategy exploits both cyclical and secular macro themes throughout global equity, commodity, currency, and fixed income markets.Crescat Long/Short: The cure for the common index fund. Guided by Crescat’s fundamental stock-scoring model and macro themes, our equity-only hedge fund seeks to deliver alpha from long and short stock picking combined with intrepid navigation of the business cycle. This fund can be tactically net short in highly overvalued markets ahead of and during probable bear markets.Crescat Large Cap: An actively managed portfolio of global large cap equities. Crescat’s longest running strategy has outperformed the S&P 500 over the long term through multiple business cycles. It is a long-only, separately managed account (SMA) strategy. In extreme times, this strategy can hold up to 50% cash and precious metals to protect against expected macro downturns.Crescat Precious Metals: A core macro asset class for a variety of economic conditions. Offers strong appreciation potential during both inflationary and recessionary environments. We navigate the precious metals cycle through this long-only SMA strategy focused on a well-researched portfolio of global all-cap gold and silver mining equities. Precious metals securities offer healthy long-term total return prospects with low correlation to more highly trafficked asset classes.Important disclosures can be found here.

Additional disclosure: Performance data represents past performance, and past performance does not guarantee future results. An individual investor’s results may vary due to the timing of capital transactions. Performance for all strategies is expressed in U.S. dollars. Cash returns are included in the total account and are not detailed separately. Investment results shown are for taxable and tax-exempt clients and include the reinvestment of dividends, interest, capital gains, and other earnings. Any possible tax liabilities incurred by the taxable accounts have not been reflected in the net performance. Performance is compared to an index, however, the volatility of an index varies greatly and investments cannot be made directly in an index. Market conditions vary from year to year and can result in a decline in market value due to material market or economic conditions. There should be no expectation that any strategy will be profitable or provide a specified return. Case studies are included for informational purposes only and are provided as a general overview of our general investment process, and not as indicative of any investment experience. There is no guarantee that the case studies discussed here are completely representative of our strategies or of the entirety of our investments, and we reserve the right to use or modify some or all of the methodologies mentioned herein.

© 2022 Crescat Capital LLC

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