Precious metals specialist hedge fund Delbrook gains more than 20 per cent in July

Precious metals

Delbrook Capital, a Vancouver-based specialist metals-focused long/short equity hedge fund, has continued to capitalise on this summer’s soaring precious metal prices.

The firm’s long/short equity-focused strategy, the Delbrook Resource Opportunities Master Fund, was up 21.6 per cent in July, bringing its year-to-date gain to more than 102 per cent, according to its latest investor bulletin.

Delbrook’s strategy combines relative value, event driven and opportunistic investment approaches focusing on a range of precious metals - including gold, silver, platinum and palladium - as well as base metals like copper and zinc, industrial metals such as iron ore and coal, and energy metals including lithium and uranium.

July’s gain – the fund’s fourth double-digit return in as many months – was driven by overweight precious metal equities positions, predominantly in mid-cap production and development stocks, as well as increased portfolio hedges using sector-focused ETFs.

The firm, which is led by founder, managing director and portfolio manager Matthew Zabloski, believes that stock selection is now paramount in light of mass inflows of generalist capital into the precious metals sector, which has powered gold prices to historic highs in recent weeks but ignores company fundamentals.

“The present climate represents a critical inflection point for investors,” the firm noted this week.

“The flexibility of a long/short multi-strategy approach makes our role as an asset manager more practicable in such a market. Sector inflows were not particularly discriminating, and valuations have decoupled for many lower-quality assets.

“This should lead to a more significant opportunity for alpha generation through single name short positions in equities, which have been lifted to unjustified valuations by those not willing or able to discern quality through fundamental research.”