Charlotte Lane April, 2016 Letter

Charlotte Lane finished the month up 0.64% vs. the S&P 500’s 0.39% advance. Year-to-date, the strategy is down 2.02% vs. the S&P 500’s +1.74% performance.

For the month, the Fund was net short 46% on average while being 196% gross invested.

Part 1: April Performance
The market and Charlotte Lane traded in an exceptionally narrow range throughout the month. Charlotte Lane benefited from strong performance in the long book offset by a drawdown in the short book. Positive performance was broad-based -- I was particularly pleased with our performance in Energy, given our single digit net exposure, as well as in Industrials, where we maintain large short exposures. To the negative, Consumer Staples and Discretionary were our most prominent detractors. These are two sectors I believe hold the potential for excellent risk adjusted returns over the coming year.

Part 2: The Big Short
Charlotte Lane is one of tens of thousands of alternative investment strategies out there, which come in all shapes and sizes. In equities, however, I believe most hedge funds are somewhere in the 30-70% net long range. I stick out given the pronounced net short position.

Now is not the time to be long for a hedge fund; quite the contrary, in my opinion. Any investment, or outlay of capital, should be underwritten such that it offers a rate of return that compensates one for the risk of loss. I don’t see that much on the long side today and I see it in abundance on the short side. I will review why I believe our large net short position will yield over the intermediate term positive absolute and risk-adjusted returns. I will also discuss the antitheses to that statement, and why exactly I run a strategy that can range from a 100% short position to 100% long.