LJM Partners, Ltd - Moving Forward
23October2008
The losses experienced over the past 45 days are severe and LJM Partners understands and has felt itself the pain of these losses. Conditions in the equity and volatility markets were extreme and unparalleled to those of the past 20 years. LJM’s intention is to learn from the experience and work diligently for clients to recover losses with appropriate strategies in volatile markets.
Decisions in our Aggressive trading strategy, while made with good intent and with the objective of capital retention, obviously failed to avert a major drawdown. On Thursday, October 16th, LJM staff removed all risk to further downside volatility and to preserve remaining capital. While a very small number of short call positions remain in accounts, they pose little risk to further market volatility increases. Current account equity levels are secure.
The primary question being asked by LJM clients is “How is LJM responding to the current losses and market conditions? “, and, “What are LJM’s plans moving forward?”
LJM is committed to its clients and is making additional investments in LJM’s infrastructure to secure and improve all operations. Tony Caine remains LJM’s investment principal and will retain responsibility for all trading strategies. Daily trading execution and risk management is transitioning to Mark Shepherd and Guillermo Bublik, respectively, at LJM’s office in Chicago. LJM will be recruiting an additional trader with expertise in volatility trading and hedging to complement and provide redundancy for existing staff. A transition to “electronic trading” is being planned which provides greater efficiencies and cost savings in trading execution. Systematic discipline for market entry and exit to limit losses are included in all future strategies.
LJM retains belief in the fundamentals of its historic strategies which have yielded positive long term returns. As referenced above, the strategies will be altered to accommodate for outlier events similar to the recent market and volatility movements. LJM will remain “on the sidelines” until such time that market conditions are appropriate for reentry. Heightened volatility is expected to continue to provide opportunities for LJM strategies, but only at the appropriate timing. When LJM perceives the trends in volatility to be decreasing and for trading environments to be more conducive, we will initiate the strategies on a gradual, incremental basis. Most likely, the timing will be after the election and after the November 7th employment report.
In order to accommodate the incorporation of hedging and a more conservative fund management strategy, LJM has made a decision to no longer carry private managed accounts. For those clients desiring to continue their investment with LJM we are requesting for funds to be transferred to LJM Fund, L.P. The performance of LJM Fund, L.P. year-to-date (2008) is approximately (-23%) which compares favorably with the S&P benchmark (-38.9%). LJM Fund, L.P. is traded in the Moderately Aggressive strategy which adds hedging to the Aggressive strategy traditionally offered with managed accounts. In many market conditions the LJM Fund, L.P. will target returns exceeding 20% and coupled with the hedging is the appropriate investment vehicle to rebuild account values.
The process to transition to LJM Fund, L.P. entails redeeming your managed account and returning your funds to your personal bank account. New account documents will need to be completed. In addition to the trading strategy a tax benefit exists relative to managed accounts and losses experienced with managed accounts (high water marks) will be carried across to new accounts in the LJM Fund, L.P. Please contact Scott Sykora to discuss in greater detail.
Our role at LJM is to provide as much information as possible and allow you to make decisions regarding your investments. If you choose to continue an investment with LJM you have our commitment that we will work diligently toward the objective to grow your capital over long term.
Thank you,
Anthony Caine J. Scott Sykora
If you have any questions regarding LJM Partners, please contact us.
Past Performance Is Not Indicative of Future Results