The Progressive Global Fund (PGF) returned -0.4% net of all fees for the month of May ending 7 months of positive returns. This result underperformed the ASX which was up ~2% for the month.

What goes up must come down. This was the theme of the month and our performance was primarily driven from a couple of larger higher conviction positions having a healthy retracement during May. As we have written about lately, the fund has moved into a far more conservative positioning as we head towards the close of the Australian financial year. We remain conservative as we continue to assess opportunities and await favourable valuations before the deployment of our capital.



The Fund’s Performance & Market Review

The portfolio didn’t see a lot of transactions over the month and finished the month with net exposure of 53%. We have cash holdings around 25% and a short hedge book that makes up 22% of the overall portfolio. The fund saw modest losses in the long book, while the short book gained 0.5% in the period.

As the market continues to lack any clear direction, we have not found any low risk opportunities to deploy significant capital towards. Hence, we continue to be patient in waiting for the market to deliver us the right opportunities to take advantage of.



Market Views & Risks:

We don’t believe much has changed and our view remains the same as our past notes – so we will keep this brief.

Global markets are showing more and more signs of late cycle exuberance. Another sign we thought noteworthy was some of the real world evidence apparent at the first crypto-currency conference held in Miami. At this conference there was a lot of ‘interesting’ individuals showing their passion for the crypto currency fad currently taking the world by storm. At this collection of enthusiasts there were several instances of fanatical individuals doing crazy things… we can only imagine what it would have been like to actually attend (we wouldn’t).

As an example, this gentleman jumped on stage and stripped down into a Dodgecoin outfit… which is a crypto currency that was created as a joke with no tangible value.

It’s signs like this that make us more concerned about the stage of the asset bubble we are in… and we couldn’t help but imagine the similarities between this conference and the one attended by the Steve Carroll in the infamous finance movie “The Big Short” where he attends a conference attended by exuberant real estate fanatics during the property bubble proceeding the GFC… In the movie after attending the event he proceeds to get straight onto the phone back to his office saying “its time to call Bullshit on this whole thing”… it feels like the markets might be at a similar point in their journey. The scary thing is that even after this event, the market in the movie continued higher. The hardest thing is getting off the merry go round before it stops… and while its impossible to know if its about to stop, we continue to think the signs keep flashing the warning – Proceed with caution!

As always, if you would like to co-invest in the fund or learn more about what we do – please contact us through our website.