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


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Sub
Advisor

PI Financial Corp. is the Sub-Advisor to the Blackheath Tactical FI Strategy

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 October 31, 2017:

Blackheath Tactical FI Strategy: US $6.72 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%
0.16%
0.85%
2.08%
 
 
6.61%
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, Sub-Advisor

Levente is a Senior Derivatives Portfolio Manager with PI FInancial Corp, the Sub-Advisor to the Blackheath Tactical FI Strategy, and 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

October 2017 Performance Commentary


Proprietary Pro-Forma Perfomance Net Returns

Monthly Return*

Year to Date*

Since Inception*

2.08%

6.61%

179.47%

 
* 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 tried to rally again during the first two weeks of the month, but there was no follow-through buying left as the 10 -year note yield approached even 2.25% as opposed to September’s crack at 2%. As a result, the US Treasury Long Bond traded in a tight choppy range. The monthly seasonal tendencies of weak first half and recovery during the second half did not work, as bonds traded in opposite-world most of the time. For the month bonds drifted slightly lower, but were less than half a point away from where they started October. I am not even going to bother mentioning that the stock market continued to trade to new highs practically every day, in spite of negative seasonality for that sector last month. The economic data was mostly stronger than expected, not only in the United States but also in the rest of the developed world.  This caused shorter term yields to rise somewhat as a number Central Banks are now in tightening mode.

Central Banks were front and center last month again. The US Federal Reserve Bank held its policy rate steady at its latest FOMC meeting (on November 1) at 1.25% but it is expected to raise to 1.5% at the next meeting mid-December. The Federal Reserve is expected to have a new leader in place as Jerome Powell was nominated to replace Janet Yellen in February of next year. At first blush it appears that Chairman Powell will follow in the footsteps of his predecessors (Bernanke and Yellen) as a slight dove and a consensus builder. The Bank of Canada decided to do another about-face at their latest policy meeting early October. After two consecutive rate hikes, they announced that a pause in tightening was in order. On the other side of the pond, the European Central Bank finally announced that it will start paring back its Quantitative Easing programs early next year. The Bank of England also looks set to join the hiking party, as it is expected to raise rates soon for the first time in a decade.

As bonds traded lower, we maintained our positive bias. The 10-year Treasury note yield traded as high as 2.48% before recovering somewhat into month end. We continued with our neutral bias in our option selling strategy. As yields moved higher, we sold and stayed with a short put position. The puts that we sold were assigned resulting in a long futures position. We managed to take advantage of the recovery into month end, to end the month in the green.

Looking ahead, we expect the range trade to continue with an upward bias in prices. We had a further dip with the US Treasury 10-year yield back near 2.50%, which is right at the top of the recent 2%-2.5% multi-month range.   We are working an order to sell our futures position at slightly higher prices. Once that is accomplished, we will be looking to buy dips again with selling a fresh set of puts. In case the market does not reach our sell order level during the first week, we will sell at-the-money calls to end up with a covered call position that will still give us a long bias as well as option decay in the market. Meanwhile, implied volatility remained low. While we still want to be in the market earning the decay on the options we sell, we plan to keep our risk exposure at conservative levels until vols rise further.
All the best,

Levente Mady
Senior Derivatives PM at PI Financial Corp.,
Sub-Advisor to the Blackheath Tactical FI Strategy
(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.