STI Hedge Fund May Performance

As expected due to more trading opportunities in May the performance was much better than any month in 2011. We finished trading in May with an annualized gain of 17.499% , including allowing for .096% expense for the month. May was also helped with less expense from interest cost. That likely will not continue as the interest expense was lower than normal. May trading was helped significantly by oil stock gains. utility stock gains, telecom gains, and a fewer number of trades not meeting desired minimum results. Despite the good results we are not pleased with the current year to date results, 15.82%, as we trail 2010 by a good bit. Most of this is due to the less volatile market in 2011 versus 2010. Our annual goal is 18%.

Looking forward to June trading uncertainly reins as we await final fed decisions on the ending of QE2. We also expect interest rates could rise in July which could cause markets to be unstable. We again have good trading opportunties coming from expiring positions in June, so we still could produce 15% plus annualized gains. FTR, WIN, and SCCO are carry forward losses currently, but much less than the end of April. The slowing economy continues to be of concern as well and thus we have reduced more sensitive positions going forward into the last half of the year. Concentrated positions in oil, preferred bonds, junk bonds, and real estate might lessen danger for the ongoing portfolio. We also are moving gradually into larger cap stocks for similar reasons. Lastly we have shortened option expiration dates until we are more insight into future market conditions.

Our results for the year to date are beating many hedge fund results and currently we know of no other comparable fund matching our gains either. Our charitable trust is benefiting handsomely from the work. Most importantly we want to point out the STI Hedge Fund trades only the put side of the option trade in the fund and not the call side. We prefer this approach as it reduces risk significantly while still producing market beating results. If we did trade the call side we would increase our annual gain percentage by 6% to 8% over what we are doing now for a total of 22% to 24%.