Black Bear Value Fund commentary for the month ended December 31, 2023.
Dear Partners and Friends,
- Black Bear Value Fund returned -1.1%, net, in December and is +17.7%, net, in 2023.
- The HFRI Value Index returned +4.4% in December and is +13.8% in 2023.
- The S&P 500 returned +4.5% in December and is +26.3% in 2023.
Please note returns could vary depending on your time of investment.
Read more hedge fund letters here
While our returns lagged the broader market in 2023, we achieved ~2/3 of the market return with about 30% of the market risk (given our large short position). In an extremely "happy" year we are unlikely to keep up with the market and are focused on protecting our capital during more ebullient times (see 2022). Given our concentrated nature, the portfolio can ebb and flow and look out of step with the broader markets....this is a feature not a bug.
Our total portfolio holdings (longs only) are disclosed in this tear sheet. Our top 5 weightings are disclosed as well. You will notice that we own 7 businesses (3 from Canada) and have our highest level of concentration relative to any previous year. We also have a very large short equity position as the market remain extremely bifurcated. Broadly speaking, there is a lot of optimism baked into the "market" valuations. While that optimism could be rewarded, it seems many of the broader risks are being underappreciated. I am much more comfortable investing a lot in a handful of specific companies than investing a handful in a lot of broadly diversified companies.
You will also notice that our credit related short is meaningfully smaller. We largely exited the outright Junk Credit short. We are short many businesses with Junk-like capital structures and the returns are more asymmetric given the longer duration of the equity. This will be discussed more in our year-end letter.
Our year-end letter will be coming out later in January.
Thank you for your trust and support,
Adam
