Newsletter Volume 1, Issue 4

Volume 1, Issue 4: August 3, 2018
Published Privately to Accredited Investors Only Prior to Filing Form D for 506c with Securities And Exchange Commission

MACH 100 LP

INVESTMENT RETURN SUMMARY

Mach 100 LP Investment Performance Results are presented gross and net. Net results are for an investor since inception, net of 1% management fee and 25% performance allocation with a “high watermark” threshold. Individual investor’s performance may vary based on time of investment and class of investment. Since inception returns are from fund inception 4/2018.

See Important Performance Disclosures

PERFORMANCE DESCRIPTION

June 2018 completes Mach 100 LP’s 1st quarter of investing. For the month ending June 30, 2018, Mach 100 LP was down 0.43%. This compares to the S&P 500 that was up 0.48%, the NASDAQ Composite up 0.92% and the Russell Microcap which was up 1.30%. For the quarter ending June 30, 2018, Mach 100 LP is up 16.84%. This compares to the quarterly performance of the S&P 500 that is up 2.93%, the NASDAQ Composite up 6.33% and the Russell Microcap up 9.97%. Year to date (YTD) through June, Mach 100 LP is up 16.84%. The S&P 500 is up 1.67%, NASDAQ Composite up 8.79% and Russell Microcap is up 10.71% year to date. June was a relatively “choppy” month with the indices up and down but ending up for the month. Mach 100 LP, while slightly down, continued to focus upon establishing core positions in the portfolio. While June was relatively volatile, we saw upside volatility largely on low volume for the non-Mega market capitalization names. As Mach 100 LP’s investment strategy is a global, non-correlated, small cap and micro cap, long/short, strategy that is a concentrated fund capitalizing on discovery premium and information arbitrage, it is expected that our positions in the fund often trade based upon their own fundamentals and the supply demand situation of the security or event that is fact specific to the respective portfolio securities (e.g. stock, bond, metal, etc.); not based upon the performance of the broad financial markets. June was a continuation of our non-correlation to the indices. That being said, the index with the closest proxy to our Fund, is the Russell Micro Cap index. Our goal is to always possess minimal correlation to all indices. We believe this strategy will produce the maximum alpha. Currently we continue to maintain a meaningful cash position as Mach 100 LP builds its investment portfolio along with our growth in assets under management (AUM).

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SECTOR ALLOCATION

Currently (approximately as of this writing) the Fund has positions (which are always subject to change without notice or obligation), long and short, in the following industry sectors and subsectors: aerospace/defense (photon based energy for manufacturing and defense); leisure (transaction processing for sports betting); medical device (fertility, home infusion and disposables); nutraceuticals; software (property and casualty insurance, mobile gaming and social apps); retail apparel; semiconductors (video processing); and steel production.

LONG/SHORT PORTFOLIO EXPOSURE

Currently, (approximately as of this writing) the Fund’s long/short portfolio exposure (which is always subject to change without notice or obligation), the Fund’s is 75% Long, 2% short and 23% in cash. Therefore 73% Net Long.

PORTFOLIO COMPOSITION

Mach 100 LP is a global small cap and micro cap, concentrated, Fund. When Steve and I started our first hedge fund in 1994, our hedge fund’s portfolio was almost exclusively U.S. companies with an occasional Canadian company, that usually traded in the U.S. Twenty Four years later, Mach 100 LP, with a very similar strategy to our successful, original fund, DNB Fund Partners LP, is global. Because of all of the technological advancements in Fintech (financial technology), we have the ability to trade almost any [read – Any] market in the world, with direct and real time access those international markets; without the need to rely on American Depository Receipts (ADR’s) or brokerage intermediaries. We possess just as much news, information, analytics, as international investors in their local markets; and sometimes, due to the extremely sophisticated analytics and trading platforms that we utilize, we have more information than they do. As one might surmise, advantages are a function of information via research, analytics and trading technology (access and execution). However, the most important utilization of any information and potential advantage [we call it Edge] is a function of our judgment (how we think and our decision making). In terms of speaking with companies located one or two oceans away, they are generally delighted to have interest from U.S. investors.

Today, we have positions in international companies located in Finland, Italy, Canada and Israel. Some of these companies trade on U.S. exchanges and markets and some only trade on their respective foreign exchanges. Interestingly enough, we started researching a company located in Oslo, Norway. The Company just relocated its main manufacturing operations to San Jose, California with its headquarters still located in Oslo. While it theoretically trades in the U.S. on the Over The Counter market, there is practically speaking, no trading volume in this security on the Over The Counter market; In other words, in the U.S. it cannot be bought or sold. In contrast, on the Oslo, Norway market, trading volume is heavy. Today for example it traded almost 10 million shares. Accordingly, if you want to invest or trade this company, you need to trade it on the Oslo, Norway exchange. Whether its Amazon delivering packages to 3rd world countries or investors trading international markets with direct access in real time, the world has definitely become economically flat.

David N. Baker and Steven Shum

Mach 100 LP is a global small and micro-cap, non-correlated, equity focused hedge fund possessing concentrated positions and capitalizing on discovery premium and information arbitrage (disparities from publicly available information). The Fund’s investment objective is to generate absolute returns that are largely alpha (the active component of investment returns that are in excess of the financial markets’ movement as a whole). The Fund utilizes fundamental quantitative and qualitative analysis, assessment of securities and broad market behavior, trading psychology and return risk profiling to determine portfolio exposure and select investments across asset classes, instrument types, industry sectors and geographies. Managed by industry veterans, the Fund is designed to generate consistent, positive investment returns with low net portfolio exposure and lower correlations than typical equity market benchmarks. As a pooled investment vehicle, the Fund may employ a diverse combination of equity, equity arbitrage, equity linked derivatives, debt and other investment and hedging instruments (including cash) in order to achieve its objectives. The Fund’s long portfolio focuses upon emerging growth companies across the small and micro-capitalization tiers (~$50 million to $2 billion). Its short portfolio focuses upon fundamentally flawed companies. This strategy presents both the opportunity to achieve higher gains, as well as creating unique challenges that require significant skill, as well as deep and broad experiences within these volatile capitalization tiers; and of paramount importance, the right trading psychology. Mach 100 LP believes it has the right team to successfully capitalize on these opportunities to produce superior investment returns.

 

Fund Service Providers
Prime Broker: Escrow Bank Administrator Auditor Securities Counsel
Interactive Brokers LLC CIBC Bank Opus Fund Services LLC KPMG Faegre Baker Daniels LLP

David N. Baker

Managing Principal

Mercadyne Fund Management LLC

6565 Spencer St., Suite 205

Las Vegas NV 89119 

dnb@mercadyne.com

415.297.4749

 

By |2018-09-10T19:47:09+00:00August 30th, 2018|Unaccredited Newsletters, Uncategorized|0 Comments