For the last couple of days we've talked about the newly listed Fundrise Innovation Fund (VCX) which is a closed end fund that inflated to a 1900% to NAV on Wednesday, then yesterday fell to just an 1100 premium to NAV. At the open, it took another huge leg down.
The NAV remember was reported/estimated to be about $20. The drop on Thursday is being attributed to news that Citron Research went short with the the primary thesis being "simple math." VCX holds a lot of the "right" companies so that is intriguing but with reports floating out there that SpaceX will go public in June or July and Anthropic in the fall, given the market caps, the odds that you will end up with them in something you already own are pretty high.
The WSJ piled on to Blue Owl with questions/observations about its recent loan sale from a few weeks ago at just a tiny discount to par. It read to me like they sold the good stuff to larger pools doubling down on their existing stakes and leaving the inferior loans still in the funds.
Regardless of whether my take is right or not, this whole thing is a complexity bourn of greed (chasing yield) that was easily avoided in real time. Dani Burger shared an anecdote on Bloomberg from some interview she did where the guest said her parents are older and need liquidity and income but that their advisor was pitching private credit to them. This is complexity that was and is easily avoidable, repeated for emphasis.
AQR filed for an interval fund that will be called AQR Delphi Long Short Fund. The filing reads like it will have a similar strategy as client/personal holding BTAL, "...long-basis in assets the Adviser deems to be attractively valued, high quality and, low beta (lower risk) assets and on a short- basis in assets the Adviser deems to be expensive, low quality and high beta (higher risk) assets."
Long/short is a fascinating strategy for how much ground it can cover. We've used the terms long biased, market neutral and short biased to cover the space. We've looked at the Invenomic Fund (BIVIX) as one that appears to be able to go from long biased to short biased, having made one or two great calls leading to a couple of massive up years earlier in its existence. Managed futures is also a version of long/short.
Equity long short is probably like managed futures in terms of anyone want to go heavy should probably use more than one fund. There's a lot of performance dispersion.
I use short biased, neutral and managed futures for long/short.
The war has become a real market event. Hard to say at this point how serious it will be in market terms but this is a noteworthy reaction.
Eight percent in a month is kind of a fast decline. It's nothing like the Tariff Crash last April or the Covid Crash in 2020 but it is something. You might know from reading this blog that I put a lot of effort into trying to prepare clients and the portfolio ahead of time for when things get bumpy (or worse). I constantly write about the strategy and tools I use. Now that an event is underway, most of the work should be done. Whether or not I make another tweak or two depends on an unknowable future sequence of events. The point is having a process you believe in, more like have unyielding faith in, and letting it work without being in the business of trying to predict anything or (over) reacting to whatever is scaring markets at the moment.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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