Dear Investor,
I take great pride in reporting that LJM Partners, Ltd. (“LJM”) has provided superior capital growth to its investors for over 11 years. $1,000 invested in July 1998 in the LJM Aggressive Strategy is now worth $9,418. (est.) on August 31, 2010. The intent of this letter is to accurately position LJM funds as an alternative investment and to provide the LJM investor a perspective of the basic tenets practiced in fund management.
As their names suggest, the LJM Aggressive and Moderately Aggressive trading strategies should be considered aggressive investment vehicles. These products are suited for institutions and high net worth investors who understand and accept the risks and potential volatility associated with aggressive returns. These two products are intended to comprise a smaller and aggressive portion of a diversified investment portfolio
Conversely, the LJM Preservation and Growth Strategy is designed to preserve capital during extreme market sell-offs at the same time targeting annual growth of 8-12%.
Managing risk relative to potential returns over a multi-year period is paramount to LJM’s success. The returns sought by LJM funds are aggressive relative to historic returns for equity indexes, mutual funds, and traditional investment vehicles. While total risk of LJM funds may be greater than many investment vehicles, incremental risk of LJM funds relative to potential returns can be commensurately less. This tenet of LJM’s investment philosophy is exhibited through its performance record.
LJM’s strategies employ the selling of options on S&P futures, which is commonly viewed to be extremely risky. However, options utilized in their truest intent and properly managed are instruments to decrement, not increment risk. The selling of short option premium can actually reduce overall risk in an investment portfolio in many (but not all) market conditions as LJM's returns are generally uncorrelated with the S&P 500. If the correlation of varied investments are monitored within a portfolio, an LJM account can be effectively utilized to augment overall returns with relatively low incremental risk.
LJM trading strategies are based on “market neutral” positions because I maintain the premise that markets are priced efficiently and that I am not smart enough to predict market direction. By utilizing a market neutral strategy, LJM is able to profit in up, down, and lateral markets - profits are derived as a function of time and volatility, not market direction.
LJM does not utilize mechanical systems and nor utilize technical analysis, which I believe is a great indicator of what happened yesterday. However, trading disciplines which monitor risk and maintain neutrality are practiced, and there is a “human factor” in assessing all trading decisions. LJM follows and incorporates into trading decisions fundamental business and macro economic factors including projected earnings, interest rate markets, employment, and inflation. LJM has altered trading strategies and will continue to make adjustments as a byproduct of new market dynamics, geo-political and world events.
LJM is defined by its success in delivering long term capital growth to our clients. Investors in LJM funds should know that in addition to being LJM’s Chairman, I am also LJM’s largest client. There are no conflicts of interest in that my personal funds, while completely segregated, are invested in parallel with LJM client funds utilizing identical strategies.
To existing LJM clients, I thank you for your business and on-going confidence in LJM’s investment strategies. To prospective clients, I encourage you to read completely all of the information contained in the LJM Disclosure Document and have every question adequately addressed before making an investment decision.
Sincerely,
Anthony J. Caine
Founder and Chairman
LJM Partners, Ltd.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.