VB - LRT Capital Management April 2023 Investor Update

2023-05-03 02:45:00 ET

Summary

• LRT Capital is a fundamental investment hedge fund. Our sole aim in crafting our investment program is to maximize long-term investment returns.
• April was a good month for our strategy as we made money on both our hedges, which declined, and on our longs which rose slightly during the month.
• The portfolio is carefully constructed to minimize factor tilts and over-exposure to any one market “theme”.

Dear Friends & Partners,

Our investment returns are summarized in the table below:

Results as of 4/30/2023. Periods longer than one year are annualized. All results are net of all fees and expenses. Past returns are no guarantee of future results. Please see the end of this letter for additional disclosures.

April was a good month for our strategy. We made money on both our hedges, which declined, and on our longs which rose slightly during the month. See the appendix for a complete attribution. I remain cautiously optimistic for the rest of the year, even though we are now entering the seasonally worst part of the year (May to late October). I see our portfolio as being very conservatively positioned. There was very little portfolio activity during the month. See the appendix for more information.

I don’t have much to report to you this month. I continue to expect economic and stock market weakness ahead, but as many of you know I don’t make short-term investment decisions based on macroeconomic sentiments. Our investment strategy remains unchanged at its core, and I think it is worth restating it periodically. We are long a highly diversified portfolio of high-quality companies: those possessing a strong competitive moat, an ability to grow and reinvest capital, and management teams with a good track record of allocating capital. We then hedge our exposure by going short market indexes, primarily small- and mid-cap index ETFs. The portfolio is carefully constructed to minimize factor tilts and over-exposure to any one market “theme”. Through this portfolio construction, we strive to minimize the impact of market fluctuations on our investments and deliver consistent returns through the market cycle. I will delve deeper into this in my next letter to you.

As always, I look forward to hearing from you and answering any questions you might have. Thank you for your continued interest and support.

Lukasz Tomicki

Portfolio Manager, LRT Capital

Attributions and Holdings as of 5/1/2023

Hedges (%) – As of 5/1/2023 Crown Castle International Corp. ((CCI))

Source: Bloomberg, Sentieo.

Numbers may not add up due to rounding. Net returns are net of a hypothetical 1% annual management fee (charged quarterly) and 20% annual performance fee. Individual account results may vary due to the timing of investments and fee structure. Please consult your statements for exact results. Please see the end of this letter for additional disclosures.

Appendix I: Portfolio Construction Software Overview

LRT separates the discretionary and qualitative process of selecting the equity holdings from the portfolio construction process which is systematic and quantitative .

Our quantitative process considers each position’s contribution to portfolio volatility, contribution of idiosyncratic vs. systematic risk, and portfolio factor (size, value, quality, momentum, vol, etc.) exposures.

The system outputs target portfolio weighs for each position. We trade mechanically to rebalance the portfolio each month to the targeted exposures. This eliminates emotions, human biases, and overconfidence risk.

Example system output:

Disclaimer and Contact Information

LRT Capital Management, LLC is an Exempt Reporting Adviser with the Texas State Securities Board, CRD #290260. Past returns are no guarantee of future results. Results are net of a hypothetical 1% annual management fee (charged quarterly) and 20% annual performance fee. Individual account returns may vary based on the timing of investments and individual fee structure.

This memorandum and the information included herein is confidential and is intended solely for the information and exclusive use of the person to whom it has been provided. It is not to be reproduced or transmitted, in whole or in part, to any other person. Each recipient of this memorandum agrees to treat the memorandum and the information included herein as confidential and further agrees not to transmit, reproduce, or make available to anyone, in whole or in part, any of the information included herein. Each person who receives a copy of this memorandum is deemed to have agreed to return this memorandum to the General Partner upon request.

Investment in the Fund involves significant risks, including but not limited to the risks that the indices within the Fund perform unfavorably, there are disruption of the orderly markets of the securities traded in the Fund, trading errors occur, and the computer software and hardware on which the General Partner relies experiences technical issues. All investing involves risk of loss, including the possible loss of all amounts invested. Past performance may not be indicative of any future results. No current or prospective client should assume that the future performance of any investment or investment strategy referenced directly or indirectly herein will perform in the same manner in the future. Different types of investments and investment strategies involve varying degrees of risk—all investing involves risk—and may experience positive or negative growth. Nothing herein should be construed as guaranteeing any investment performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. For a more detailed explanation of risks relating to an investment, please review the Fund’s Private Placement Memorandum, Limited Partnership Agreement, and Subscription Documents (Offering Documents).

This report is for informational purposes only and does not constitute an offer to sell, solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Any offer to sell is done exclusively through the Fund's Private Placement

Memorandum. All persons interested in subscribing to the Fund should first review the Fund’s Offering Documents, copies of which are available upon request. The information contained herein has been prepared by the General Partner and is current as of the date of transmission. Such information is subject to change. Any statements or facts contained herein derived from third-party sources are believed to be reliable but are not guaranteed as to their accuracy or completeness. Investment in the Fund is permitted only by "accredited investors" as defined in the Securities Act of 1933, as amended. These requirements are set forth in detail in the Offering Documents.

Performance

As of 4/30/2023. Returns longer than one year are annualized. Inception is 10/1/2012. Past performance is no guarantee of future results .

We invest exclusively in companies with the following three characteristics:

LRT Capital Management, LLC is an Exempt Reporting Adviser with the Texas State Securities Board. This report is for informational purposes only and does not constitute an offer to sell, solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Any offer to sell is done exclusively through the fund's Private Placement Memorandum.

Past performance may not be indicative of any future results. No current or prospective client should assume that the future performance of any investment or investment strategy referenced directly or indirectly herein will perform in the same manner in the future. Different types of investments and investment strategies involve varying degrees of risk—all investing involves risk—and may experience positive or negative growth. Nothing herein should be construed as guaranteeing any investment performance.

LRT Capital Management, LLC uses the S&P 500 for comparison purposes only. The S&P 500 measures the stock performance of 500 large companies listed on stock exchanges in the United States. The Fund does not attempt to replicate the performance of any index. In addition, the Fund may have strategies, including the use of leverage, which may result in material difference between the returns of the Fund and any index. The comparisons should not be understood to mean there will necessarily be a correlation between the Fund’s returns and any index. The performance of indices shown may not fully reflect management, performance or other fees and expenses that may be incurred to invest in an indices’ underlying securities. References to indices herein are for informational and general comparative purposes only. There are significant differences between such indices and the investment program of the Fund. The Fund does not invest in all or necessarily any significant portion of the securities, industries or strategies represented by such indices. References to indices do not suggest that the Fund will, or is likely to achieve returns, volatility or other results similar to such indices. Indices are not managed and have no fees and expenses.

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