CITIGROUP
Fixed Interest Security
We took a position that was contrary to that almost universally accepted view at the time.
Post the election of the Trump administration in November 2016, many global investors took a bearish view on the US dollar.
However, we took a position that was contrary to that almost universally accepted view at the time.
Our view was to rise above the politics and take a view on the unbridled spending & once in a generation tax cuts that were part of the campaign’s platform.
Considering the inflationary impact of those policies, we took the view that the US dollar would appreciate.
The next step in this process was to find a suitable, low risk, highly liquid investment denominated in US dollars.
15.0 %
NET TO CLIENT RETURN
10 MONTHS
HOLDING PERIOD
After extensive due diligence, we found a perpetual, interest bearing security that was issued by Citigroup.
Our thesis was if we held a US dollar denominated asset for an extended period of time, we wanted to receive an acceptable rate of interest in return for taking on that perceived level of risk at that time.
The Citigroup “perpetuals” met all those criteria.
We purchased these securities with a multi-year view.
However, the US dollar appreciated so dramatically in such a short period of time, we exited this investment after only 10 months. Our average net to client return was 15% for this shorter holding period.
*The performance was calculated as at 30 June 2018. Past performance is not necessarily indicative of future performance.
