Dear Friends,

Looking back on 2015, it seems like we just lived two different years. The first half was the year of perfection. It was as if the markets were designed to fit our models. The second half of the year was a constant battle. All in all, it was a solid year with a net return of almost 5%. We would hope for a higher return, but given the implosion in commodity prices and the choppiness elsewhere, our models simply do not react to a higher frequency chop like we saw in many markets.

From a broader perspective, the crumbling concept of reality in our culture reminds us of why we really love the business we are in. We have to start with reality. Our performance is based on a strict set of metrics. It starts with:

Return: This is the actual dollars and percentages we make or lose for our clients. We can’t even say “we were about flat” on the day if we were down 1 bps. Reality dictates that we were down 1bps. We can explain why we lost or made money with all kinds of explanations, but it is a fixed metric.

Then, Volatility: Return has to be placed into a context of risk with a metric-like volatility. We don’t buy or sell options to make this a more complex discussion. Our returns and the volatility of our returns tells most of the story on the risk we take.

Then, Market environment: We can use this as a backdrop to explain the opportunity set created by market dynamics. There are market structures which are more conducive to higher or lower returns we cannot control, but at the end of the day, our job is to design investment programs that “fit” the market environment we are given. Thus, return and volatility largely tell our story.

There is no room for me to say a blue and black dress looks like white and gold or to wonder if a man is really a woman or to debate what level of deficit spending is okay. We get to celebrate a true definition of “is”. What is… is. With this backdrop, we decided to put a little more effort into describing our investment program starting with a more basic philosophical explanation of our framework and build into that an explanation of our process…