December 2017 Fund Performance & Market Commentary

The Delbrook Resource Opportunities Fund (the “Fund”) returned +13.8% in the month of December, bringing the 2017 net return to +25.6%. For the month, long positions drove the majority of performance given our decision to tactically reduce short exposure in advance of the US Federal Reserve meeting on December 13th (more on this below). While Fund exposure was net long for the year, the Fund’s strong performance was the result of positive gross returns from both long (+25.5%) and short (+5.1%) positions.

As outlined in our November comment (link), we made a tactical decision to reduce short exposure in anticipation of the December 13th Federal Reserve meeting, believing it would mark a near term high for the US dollar, and as such, a low for precious metals. Analysis of market fundamentals, including multi-year highs in bearish sentiment for gold, trading in US treasury futures and a crowded dollar index trade led to the conclusion that a contrarian shift in allocation to precious metals was warranted. Our thesis of a “buy the rumor, sell the news” trade on the US dollar played out well as gold rallied 3.8% post meeting. We have harvested some of the profits from this short term trade and have been increasing short exposure, specifically within the precious metals complex, given our belief that equity valuations are likely to remain relatively stable in the short term.

Matthew Zabloski
Portfolio Manager/Founder