Dear Investors, Partners, and Friends,
Finally, some volatility has returned to the market. May started off with relatively wild swings and quickly settled into a wide range. The upper and lower bands of this range were tested multiple times and in a rather violent fashion. We were excited to see this break from the steady grind higher and our strategies took full advantage of the movement. As we have been saying, this is the ideal market environment for the Hyperion Fund. Our Directional Spread strategy benefited the most as we were able to forecast the short-term direction correctly more often than not and those spreads appreciated in value nicely. As the month moved on and it became clear that significant levels would not be broken the Directional Strategy mostly collected premium rather than finding intrinsic value.
Our Tactical Strategy, which uses those significant range levels established earlier in the month, was able to profit from credit spreads that were consistently left to expire. Although we can still grind out a profit in this fashion, the majority of our alpha is derived from stronger directional moves.
The Volatility trade was put on early in the month when it looked like we might see a more significant break of support. Ultimately, that never came and the volatility trade was closed for a modest profit.
Hopefully, May was a taste of things to come for this summer and beyond. The Fed is increasingly under pressure to address the rampant inflation seen across the commodity sector and this will surely upset the market. If this holds true I would expect The Fund to be able to produce returns similar to May and hopefully even more profitable. The trend over the past 2.5 months has been a volatile reaction down after a slightly higher all-time high. As we approach that all-time high once again we will wait to see how the market reacts and do our best to position ourselves for a favorable result. If you’d like to discuss any of the strategies in greater detail or discuss how we generate strong risk-adjusted returns regardless of market direction, please feel free to reach out anytime. Thank you and as always we appreciate you entrusting us with your investment.