UK Absolute Fund - January 2012 update

The Fund fell by 0.9% in December, largely because of the underperformance of several long positions. Allied Gold gave back much of November’s rise, while Indian power generator OPG fell as rupee weakness reduced margin expectations. Elementis, Kentz, New Britain Palm Oil and Rank were also weak, and the pair of long Regus against a short in a support services peer detracted. Offsetting these, long positions in Ashtead, Mecom and Hutchison China Meditech contributed positively, as did short positions in a defence company and domestic retailer, as well as pair trades in the asset management and packaging sectors. During the month we added new long positions in oil producers Ophir and Coastal Energy, and a pair of long SSE against a short in a power generator more exposed to falling generation spreads.

During the month we closed a number of positions, including longs in Mecom, LSE and Ashmore, both of our UK retail shorts, and pairs in mining and asset management. We ended the period with gross exposure around 150%, the lowest in several months, and a modest net long.