BNC#5: Cy Jacobs – Do better by protecting capital on the 10 worst days, than missing the 10 best days

In this BNC#5 presentation, Cy Jacobs focuses on hedge fund investment strategies, highlighting forensic research into businesses that are believed to be unsustainable. Jacobs discusses the ability to assess the current environment and choose between value, growth, or quality investments. Highlighting the importance of protecting capital during down markets and the benefits of shorting assets. Jacobs also delves into current market challenges, such as geopolitical tensions, COVID, zero carbon emissions, and political issues, but highlights the opportunities that exist, particularly in renewable energy investments. Jacobs concludes with a discussion on the importance of finding opportunities within a crisis.

Some extracts from the presentation:

Cy Jacobs on the 36One Asset Management background

Just a quick background on 36One – myself and the core of the team managing money for some 25 years, we believe we’ve got a pretty good track record. We have a diverse product offering, probably the largest hedge fund manager in the country, but we also manage SA equity, general equity, and balanced funds. We manage the PPS balanced fund, we have a flexible fund, long only, global fund, etc. So we are really across the whole spectrum of mandates. As Magnus said, I’m not here to sell you anything. It is really your choice as investors, if you’d like to invest with us and which fund you prefer. And obviously different funds perform differently at different stages. But I do believe our team is exceptional. We’ve built it over 18 years and it’s never been stronger and we’ve never done better relative to our competition out there.ย 

Read more: BNC#5: Magnus Heystek on the record โ€“ Western Cape; best offshore geographies; Greylisting; and much more

On assessing the current environment and looking for better

Another thing Piet’s been speaking about is value versus growth, and maybe the market has shifted now into value. At 36One, we don’t want to be boxed into value or growth, or quality. We want to assess the current environment and see what’s better. And obviously, with rates in the US spiking and, actually, rates are now looking at probably five and a half percent in the US. The cycle has switched to value and again at 36One, that means we will be short some of the long-duration names and the growth names that aren’t quality and long some of those value-based opportunitiesย 

Read more: South Africa could lose privileged access to US markets โ€“ Foreign Policy Analyst Peter Fabricius

On hedge funds being better

So back to the hedge fund. It’s very important to know markets don’t always go up – they also go down. So in the worst ten months that the markets have ever had since our existence, which goes back to 2008, 2020, for example. You can see how the fund has done in red vs the market in gray. In fact, March of 2020 was probably the worst month, when COVID struck. And you can see the hedge fund lost no money… just remember, it is often about down markets. Looking at the hedge fund, in fact over the life of the hedge fund, you can see it’s very conservative in up months – 123 up months, which is more than ten years of positive returns in the market. What’s very important is that there have also been almost 80 down months – seven years of negative markets where the markets lost 3% and our hedge fund has actually lost nothing. You put the two together, obviously, it’s a lot better than the market. And with a fraction of the risk.ย 

Read more: Investment debate with Piet Viljoen and Cy Jacobs