Performance - You Will Find Peace of Mind

You will find peace of mind
If you look way down in your heart and soul
Don’t hesitate ‘cause the world seems cold
Stay young at heart ‘cause you’re never (never, never, ...) old at heart

That’s the way of the world
Plant your flower and you grow a pearl
A child is born with a heart of gold
The way of the world makes his heart grow cold

"That's The Way of The World" by Earth Wind & Fire

Earth, Wind & Fire - That's The Way Of The World (ste. ...

It's April 1, April Fool's Day, and I've just finished downloading the 1st quarter performance numbers for our holdings, while enjoying a cup of Puerto Rican coffee overlooking the sparkling blue-green waters of the Caribbean. I'm feeling good, pleased with our performance, and at peace. I casually mention to my wife, "We had a pretty good quarter," and she says, "what's good?" I begin to define "good" by saying something like, "well it depends on what you measure it against," when she quickly cuts me off with a, "oh here it goes again". You see, we've been married for 24 years, and for all 24 years she has had to put up with me talking about "relative" quarterly performance, that's 98 quarters and counting. One of the reasons I love the investment management business is that it is measurable, precise, you can look back at your body of work and make an objective determination of whether it was good or not. But, as I've aged I've grown to realize that investment performance can be a bit like art, one man's Picasso can be an others kindergarden drawing. In other words, performance is in the eye of the beholder. I have found "peace of mind" when it comes to performance. I can slice and dice it a thousand ways, do attribution analysis, style-drift analysis, and time period analysis. I can make those numbers sing, and I can tell when someone else is making their numbers sing. "Lies, damned lies, and statistics." (by Lord Courtney 1895) But the real beauty of Rockhaven is that I am managing my money (as well as my co-investors), and it really isn't healthy to lie to yourself. So when you see me report performance it will be very complete, very unvarnished, and you can determine wether it is good or not. That's the way of the world...

So, how'd we do?

The 1st quarter saw the Rockhaven model portfolio gain 1.64%, while the actual client composite performance was 1.78% (this is net of fees & expenses).

Is that good or bad?

It depends on what you want to compare it to. We run a very diversified portfolio, (nine broad asset categories including cash), and we are tactically adjusting weights in these assets, to over-weight what is working and under-weight what is not working. Therefore, simple relative performance is not that easy, we should probably look at absolute performance. That said, old habits die hard, so if I was forced to compare our performance to a benchmark, what benchmark would I use, and how did we do? I constructed two benchmarks using the nine asset categories. The first benchmark is fully invested at my target maximums for each asset category, while the second benchmark is neutrally invested in each category and carries 35% cash. In the first quarter the fully invested benchmark returned 1.80%, while the neutrally invested benchmark returned 1.14%.

The following is a detailed breakdown of the benchmark and the Rockhaven model portfolio, and each securities quarterly performance. As an example; for US Equity exposure I use the S&P 500 Index (up 4.99%), and compare it to the security we owned, the Vanguard Total Market ETF (up 6.13%). Some may think that I don't have enough info here, while others may think that I have too much. In summary, I think it was a pretty good quarter, not spectacular but considering the amount of risk we took, pretty good. "You will find peace of mind, if you look way down in your heart and soul." You will also find peace of mind if you understand the numbers, if you want to discuss these in more detail please don't hesitate to call.

Be careful out there,

Chris Wiles

www.rockhavencapital.com

Performance Review
	Benchmark Security	1st Qtr ‘10 Return	Rockhaven GTAA Model	1st Qtr ‘10 Return
Asset Category
U.S. Equity:	S&P 500 Index (20%)	4.99%	Vanguard Total Mkt.	6.13%
International Equity:	MSCI EAFE Index (20%)	1.27%	iShares MSCI EAFE	1.27%
			Vanguard Emerging Mkts.	2.81%
Gold:	SPDR Gold Shares (10%)	1.52%	SPDR Gold Shares	1.52%
			Market Vectors Gold Miners	-3.90%
U.S. Real Estate:	MSCI REIT Index (6%)	9.93%	Vanguard MSCI REIT	9.93%
Int'l Real Estate:	FTSE/NAREIT Global Index (4%)	0.61%	iShares FTSE/NAREIT Global	0.61%
Commodities:	Reuters/Jefferies CRB Index (10%)	-3.53%	PowerShares DB Commodity	-4.48%
			Market Vectors Agribusiness	2.99%
			TR/J CRB Global Commodity	-0.15%
U.S. Fixed Income:	U.S. Treasury Bond 10-20 Year (18%)	1.77%	Vanguard Total Bond Mkt.	1.39%
			iShares Barclays TIPS	0.20%
Int'l Fixed Income:	S&P/Citi Int'l Treasury Index (12%)	-2.26%	iShares S&P/Citi Int'l Treasury	-2.26%
			SPDR DB Int'l Gov. TIPS	-0.69%
			iShares JPM Emerging Mkt Bd.	3.41%
Cash Equivalents:			Wisdom Tree Chinese Yuan	-0.24%
	Benchmark I Fully Invested	1.80%	Rockhaven Model (Avg Cash 11%)	1.64%
	Benchmark II Neutral Wt (35% Cash)	1.14%

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.