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Nov 16

TheInflationist 2 Year Performance Review

We started our private investment fund on 13 September 2009 - capitalised at 100k. Our strategy was to split our portfolio into 2 trading arms, with 20k each (one for each partner), and a long only equity portfolio of ~20k; with cash of about 40k to buffer our trading accounts against black swan events.

On 13 November 2011, 2 years 2 months later, the net value of our fund (including open positions P/L) stand at $175k, up 75%. Our performance breakdown is as follows:

1. Trading account A: 20k to 75k (+275%)

2. Trading account B: 20k to 30k (+50%)

3. Long only Equity Portfolio: 30k to 35k (+16.6%)

4. Cash: 35k

NET PORTFOLIO Performance: +75% (S&P 500 over the same period: +19.29%)

We have lightened up our trading portfolios - biggest position remains short Amazon, US Tech, long agriculture ETFs. Our equity portfolio are as displayed on the right hand side. Note that some of the “losses” displayed does not reflect cash back (Astro Japan, Straits Resources), takeovers (Chemgenex), and delisting (silver company Coeur D’alene).

How Do We Improve Our Performance?

As busy doctors in our respective specialty training programs, the aim was always to keep a healthy balance between medicine, investments, and family. It is not always easy but being able to “turn off” everyday from the trading world and spend 12-14 solid hours in the world of medicine may be a blessing in disguise to prevent overtrading. Patience is a skill we are learning. That said, time is still our biggest enemy. If only we had more time to process more annual reports. The analytical, evidence based, sceptical mindset ingrained in us doctors help us think differently. Our equity portfolio strategy is one mainly of value investing, with a bias on industries we feel will do well going forward - commodities and agriculture.

To this point, we have learnt the lessons of patience, risk management, and not to over trade. Never get cocky. We always assume our outperformance is an aberrant blip up with a stroke of luck, and that our performance will revert to the mean (downwards), so maintaining discipline to protect our profits is always #1. We may allocate more capital into our trading portfolio to improve the net performance of our fund. We have confidence that our equity portfolio is currently on “slow cook” and in time will step up to carry more weight in contributing to our fund’s profits.

Trading B account had a small set back - it was a pain to add funds to the account during volatile times and our positions were wiped out (we tried to keep the cash buffer to a minimal to prevent an MF Global crisis - ie keep withdrawing money). We failed to reestablish those short positions soon enough before the market melt down recently. Even then, we have clawed our way back to a +50% performance - not bad. No excuses. We are now keeping more cash buffer in that particular account - and may find another broker with instant cash deposit function.

We will keep you posted on our trades so stay tuned.

How Do We Compare to Top Hedge Funds?

1. Eclectica Asset Management : + 13.9 % YTD

2. John Paulson – Paulson & Co.: - 39% YTD (Advantage Fund -21%)

3. Bill Ackman – Pershing Square: -10.6% YTD.

4. Dan Loeb – Third Point:  +4.3% YTD.

5. Lee Ainslie – Maverick Fund: -8.4% YTD.

6. Jim Simons – Renaissance: +19.5% YTD.

7. Israel Englander – Millennium: + 4.9% YTD.

8. James Dinan – York Capital: -3.8% YTD.

9. John Thaler – JAT Capital: +37.9% YTD

10. Steve Heinz – Lansdowne: -10.1% YTD.

11. William von Mueffling – Cantillon: -3.6% YTD.

12. Edward Mule – Silver Point Capital: +4.5% YTD.

13. John Bader – Halcyon: +5.3% YTD.

14. Richard Perry – Perry Capital: -5.2% YTD.

15. Robert Karr – Joho Capital: + 1.7% YTD.

16. John Horseman – Horseman Capital: - 0.2% YTD.

17. Mark Kingdon – Kingdon Capital:  -11.5%

18. Curtis Macnguyen – Ivory Capital: - 4.8% YTD.

19. Adam Weiss – Scout Capital: +0.9% YTD.

20. Michael Messner – Seminole: - 3.4% YTD.

21. Jacob Gottlieb – Visium Asset Management: + 0.6% YTD.

22. Philippe Jabre – Jabre Capital: -19.9% YTD.

23. Glenn Dubin – Highbridge: - 11.2% YTD.

24. Andreas Halvorsen – Viking Global: +1.8% YTD.

*”Year To Date” performance index can be misleading. Often investment ideas take time to cook to become profitable. And a very negative YTD performance may be simply a correction following a phenomenal performance in the previous year.

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