We are pleased to present strong results for the first half of 2023. The pain of 2022 is still with us, and we have not forgotten. Last year was remarkable as both equities and bonds experienced significant declines in tandem due to the impact of inflation and steep increases in interest rates.

I have a feeling we are all  somewhat relieved to be putting 2022 behind us. Regardless of who your asset manager was, including the global brand names, 2022 was a very challenging year, testing long-held fundamental assumptions about asset allocation and money management. If you rely exclusively on past statistics, you can be optimistic about 2023 as, statistcally, almost always, a positive year follows a negative year regardless of macro considerations. The macro considerations are complex but lets hope that history does repeat itself.

I am writing to you quite humbled by the market events of 2022. Liquid portfolios (i.e. portfolios without Alternatives) for Q3 and YTD will be stark reminders to investors of the crazy days of 2008. We should take comfort that even from that period when the global financial system was at genuine risk of imploding, portfolios did recover and continued to make money.

Markets have been simply awful. The numbers presented below in the index table are exceptional, and we have not seen numbers like these since the Global Financial Crisis of 2008. I have included a few media headlines below to reemphasize this point. In addition, we are seeing that both high-quality bonds and stocks are showing significant negatives. 

This is a breakdown of a fundamental assumption of asset allocation. Typically, when stocks go down significantly, bonds go up. This year, so far, we have negatives in both. This is just one of the many challenges we  face managing money in 2022. Ukraine war, exceptional inflation, and Fed Policy make it extremely complicated to position a portfolio correctly.

By now, you have seen your Q1 reports;  you may have also seen that April added more pain. When both stock and bond indexes are negative, it is extremely difficult to make money. If there is one clear message I have, it is to be patient. The world certainly seems to be in a messy state and we need to be prepared for volatility for the forseable future. Hopefully some of that volatility will be up and not just down, as investors see good assets being oversold and will start buying again. I have compared our performance to relevant funds of our main big-name competitors (e.g., Blackrock, Deutsche Bank, Goldman Sachs and others), and you should draw some comfort from the fact that our model performance is good, in some cases excellent, on a peer-review basis.