Communications

The three months ended on September 30, like the previous two quarters, gave investors a rough ride. A number of macroeconomic factors were aligned, including inflation that was higher and more persistent than the major central banks had anticipated.

Rarely has the first half of a year been so difficult in the markets. In fact, we have to go back 50 years, to 1970, when the S&P 500 lost 21% of its value in six months. The good news? The index rose 26.5% between July and December of that year.

That is a real conversation I had recently. I have been saying since the launch of Rivemont that it’s not when everything is going well and your brother-in-law’s niece’s neighbour’s sister obtains excellent returns that it’s possible to judge a manager’s skills, but rather when times are more difficult and opportunities are less obvious to the average person.

Despite the pandemic’s major inconveniences, Rivemont maintained its rapid growth of recent years, and we now have close to $100 million in assets under management. I would like to take this opportunity to thank everyone who rolled up their sleeves to tackle the challenges that arose.

In this newsletter, we will review the decisions we made in private wealth management to establish a high-return strategy while protecting ourselves against a market reversal. I will then give more detail on the method we are introducing within the Rivemont Alpha Fund to take advantage of market volatility. I will continue with an overview of the Yale University model and conclude with our market outlook and our largest positions.

Time flies. The pandemic began more than 18 months ago and so much has changed. It’s hard for us to believe that the stock market is now hitting new highs week after week. In fact, central bank intervention has been such that all assets are now in a bull market. Lumber, canola oil, used cars, maritime transport, food: all are strongly on the rise. However, if we dig deeper, particularly in the stock market, we see that everything is not so rosy. We’ll discuss the result of this review in the first part of this financial letter.

Portfolio management consists of three distinct activities: making investment decisions, ensuring compliance and governance, and building relationships with clients, not necessarily in that order. As you know, we’ve implemented an array of new technologies to support these activities and maintain the connection between the firm and its clients. However, after nearly 12 years, our investors have also become our friends, people we talk to about our children’s graduation, our business achievements, or simply about the weather. And I can assure you that we look forward to seeing you again in the flesh and shaking your hand after this horrible pandemic. I can’t count the number of times I’ve heard this in a conversation: “Let’s go for a beer or coffee when this is over.” We’re definitely ready to greatly increase our intake of caffeine (or other liquid, where appropriate) to make up for lost time.

First off, I want to take this opportunity to thank all the front-line workers who dedicate themselves, day after day, night after night, to caring for the most vulnerable in our society. I would also like to send a message of support to all those who have seen their dreams, passions and life plans demolished as a result of this unprecedented crisis. Entrepreneurs are the pillars of our communities and the current situation is simply unsustainable for many of them. I tip my hat to all who are showing extraordinary resilience.