New York-based hedge fund firm Gondor Capital Management maintained its strong performance in 2017 as its funds, the domestic Gondor Partners LP and the offshore fund Gondor Funds LTD posted strong gains, outperforming their respective benchmarks.
In his monthly report to his investors, Gondor Capital portfolio manager Vincent Au says Gondor Partners LP gained 7.93 per cent while Gondor Funds LTD returned 7.29 per cent in the first quarter of 2017, beating their benchmark, with the HFRI Equity Hedge gaining only 3.62 per cent during the same period.
Month-to-date, Gondor’s funds also beat the average hedge funds with the onshore Gondor Partners reporting 1.41 per cent and the offshore Gondor Funds expanding 2.18 per cent in March. The HFRI Equity Hedge climbed 0.64 per cent last month.
Au says: “The performances of the funds were continually anchored by investment selection and the discipline of the strategy itself. I am though cautious about valuations overall as I am hard pressed to find any sectors that are undervalued. I believe caution is warranted and discipline to adhere to my investment strategy and a strict focus on fundamentals more crucial at this point.”
Since its inception in May 2013, Gondor’s onshore fund has generated a cumulative return 77.20 per cent compared to HFRX Equity Hedge which returned 7.03 per cent and the Barclays HFI which posted 19.20 per cent during the same period. The Gondor Funds LTD has a cumulative return of 47.54 per cent since its launch in July 2013, while the HFRX Equity Hedge and the Barclays HFI posting 8.20 per cent and 19.99 per cent respectively in the same period.
Both funds were included in Preqin’s Top Performing Relative Value Strategies Hedge Funds for 2016 as Gondor Partners closed the year up 26.53 per cent (+1.64 per cent in December) and Gondor Funds was up 26.85 per cent (+1.78 per cent in December).
Au says while geopolitical concerns have been brushed aside the last few years by the financial markets, the issues today are more susceptible to a Black Swan occurrence should the outcome not be remedied properly.
“I continue to believe the markets will struggle the rest of the year to justify the expansion of the PE multiple as well as the valuation of individual companies,” Au says. “I believe there will be periods of bullishness only to be met by periods of bearishness. Disappointments on the earnings front will be met harshly by the markets and earnings beats will be met with euphoria. Thus, the movements on either side might be more exaggerated than normal.”
However, Au says he embraces the sideways trading of the markets and the bouts of volatility: “Valuation almost never matters on the way up but almost always matters on the way down.”
