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July 2017
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Dear Clients
 
The first time I entered a gym many years ago while staying in Riebeeckstad suburb of Welkom in the Freestate, I saw in large letters:  "no gain without pain". Luckily our Unit Trust Fund of Funds, Kanaan Bci Balanced FoF is showing strong signs of a turn-around, at 1.46% (nett of all fees) after only two weeks in July 2017. Our Hedge FoF usually follows suite.
 
Polar Star, one of the 8 underlying hedge funds of Kanaan Hedge FoF in which you are invested, emailed us that they are optimistic about their portfolio's position and expect good potential upside in the next twelve to eighteen months.  Polar Star is a capped fund which means that because of their good growth since inception they had attracted business to such an extent that they decided already two years ago to cap for new business so as not to become too big and clumsy and we are therefore grateful that we already have an exposure to this fund.  
 
However, Polar Star is one of the funds that has caused Kanaan Hedge FoF to underperform since 1 January 2017 and at some stage we even thought to reduce our exposure to the fund.  See here the performance record of 5 of the underlying funds.
 
In the left hand column you will notice the Tower fund, which did unacceptably bad last year, with -13.13% and has not made a comeback, with -12.66% up to July 2017. We have already given the administrator IDS notice to get rid of Tower. Luckily you will notice, in the first row, just under the heading Tower Fund, that we had only a small exposure to the fund of only 4.6%. 
 
You will notice that the other three funds above, same as the other 5 underlying funds, except for Tower, have CAR’s (accumulative average returns since inception) of more than 15% per annum and we believe that they will revert back to their CARS under normal Market circumstances. 
 
Above you will also notice that we already have a 21.9% exposure to Polar Star.  The MT stands for the Prof Markowitz formula that advises us that we should have a 23.56% exposure.  Just below the MT you will see that the CAR (cumulative return since inception) is 21.24%. The STD (mathematical equation of volatility or Standard Deviation) of 13% is okay as long as it is less than the CAR.  
 
This is a good fund, as you can see it did 39% for 2014, 22% for 2015, but came down to 7.57% for 2016 and now the early indications for the end of June 2017 is negative again with -0.97% and year to date, down to -6.95%, but here you will see that they advise that they are optimistic for the next 12 to 18 months. For July the estimated values are already looking good, with 1.67% up to date.

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