Second quarter results, hedge fund start ups, and raising in London

Results are in for the second quarter and they're not too shabby. Plus London's thriving start-up scene.

Jul 24, 2023

Hey Accumulators

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Think of someone who would really appreciate this newsletter. Another investor, limited partner, or someone who aspires to be.
Forward this newsletter with some text like “I think you should subscribe”
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Here’s what I’d like to share this week:

Meetfounders are a superb outfit when comes to the London start-up scene. Their events are a good mix of VC’s, founders, and food. VC’s chair a panel and talk about their funds, what they look for in founders, and how they can bring their expertise to founders and not just the moola. Founders get to pitch and receive feedback on their presentations. If you’re heading to one of their events do reach out.
The London Start-Up Scene is another excellent start-up organisation that brings VC’s and founders together for networking, pitching, and drinks. There’s a pitching competition throughout the evening and plenty of time to network with founders and VC’s. The view from One Canada Square is quite interesting as well. Check them out.
Back in late April I boldly stated that regional banks are undervalued.
Over the past month, the regional banking ETF from S&P (KRE) is up 11.84%.
But there remains some overhead risk.
Pilane Capital is the reason behind my beavering in and around the start-up scene, which is highly concentrated in London. *When I re-read this newsletter during editing, I was tempted to take that phrase out. The thing is, you know which phrase I’m talking about without me even mentioning it directly*
Last time, I wrote that results for the Wealth Accumulated portfolio v the S&P 500 for the first quarter of 2023 were as follows: The Wealth Accumulated Portfolio: 1.15%, The S&P 500: 7.03%. Second quarter results and a review will form the remainder of today’s newsletter

Q2 2023 performance report

Quarterly performance reports for Pilane Capital are compiled from broker statements net of expenses, and publicly available information on the S&P 500.

Results for Pilane Capital v the S&P 500 for the second quarter of 2023 are as follows:

The Pilane Capital: 5.21%
The S&P 500: 8.30%
Maximum drawdown: 1.04%

Review

I’ll include the maximum drawdown figure moving forward now that enough data exists since inception.

For those who don’t know, the maximum drawdown measures how much the portfolio loses money from peak to trough before a new peak in total equity is obtained.

It’s measured on a quarterly basis and is meant to show how much money a fund or strategy loses expressed as a percentage.

I Googled ‘what is a good maximum drawdown’ and figures of between 20%-25% were all over the first page of results.

From the Investopedia website:

Maximum drawdown is a specific measure of drawdown that looks for the greatest movement from a high point to a low point, before a new peak is achieved. However, it’s important to note that it only measures the size of the largest loss, without taking into consideration the frequency of large losses
Adam Hayes, Invesopedia

There were four purchases in the quarter primarily to ensure that the portfolio is fully invested whilst taking advantage of reasonable prices for stocks before prices started to run away:

Bank of America
Alphabet Inc
Berkshire Hathaway
Vanguard U.S. Equity Index

Only Alphabet remains underwater since its inclusion due to ongoing struggles with AI; the market believes that it is behind its closest competitor in terms of R&D.

Interestingly Alphabet reports after the market close on Tuesday so investors will be looking for any references to improvements to Google Bard.

Outlook

It is widely expected that Jerome Powell will increase rates by 25 basis points this week which is choc full of quarterly earnings announcements. This was the case last quarter in which the FOMC decided to keep rates steady.

Despite higher rates throughout 2023, stocks have continued to climb higher, especially in the tech space due to tech’s integral role in the global economy.

Tech execs have also shed headcount and focused their energies on the next big thing: AI.

My expectation is that stocks, tech in particular, will continue on their upward trajectory for the remainder of the year which would have a positive influence on the portfolio.

Portfolio

Alphabet
Apple
Bank of America
Berkshire Hathaway
Diageo
GSK
Vanguard US Equity Index

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