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Chelston Park Energy Resource Hedge Fund


drbubb
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+ 20.73% Front Street Capital / Chelston Park Energy Resource Hedge Fund

 

For the month of November the Chelston Park Energy Resource Hedge Fund/Managed Account ended up +4.29%.

 

December is also starting off strong with the Fund/Managed Account up +1.71% as of December 9th, 2010. Year to date the performance for the fund stands at +20.73% and for the managed account +31.16%. Asset flows remain constant with Chelston Park Strategy Assets at approximately $120,000,000. Total firm assets are now at $3 billion.

 

Our hedging strategy of utilizing options has helped control weekly volatility. We continue to actively employ a put/call option writing strategy generating additional return while dampening the portfolio volatility. We find this an effective strategy to control the tail risk when we have an up and down market like the past few weeks. We remain bullish as the fund/managed account remains 70% net long.

 

Our stock selection continues to add some strong alpha to the portfolio as well, particularly our uranium and agriculture stocks. We like select opportunities as well in the coal area - we feel additional M&A can occur in this area as evidenced by the $3.3 billion dollar Western Canadian Coal takeover by Walter Energy. Several Iron Ore development companies are also on the radar in light of continued steel demand from the Far East and the M&A activity in this sector.

 

Lastly, a point of interest that we spoke to many on our last European trip about was the role of ETF’s in the commodity space. We are becoming increasingly wary of how this may swing commodity prices beyond reasonable expectations. Several new large copper ETF’s are expected to come into the market in the New Year. With tight supply this could take the commodity, and companies exposed to copper, on a bit of a roller coaster. As we see in the agriculture ETF’s, there is not enough physical commodity to actually settle all contracts outstanding. This reminds us of the credit default swap market before the troubles of 2008. Once again, owning the commodity itself should help protect this but we are mindful of how our invested companies are hedging their own prices.

 

Have a safe and happy Holiday Season. If you require any assistance please do not hesitate to contact me.

 

Best regards,

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