Experience. Intelligent Investing.

APRIL 2016
The Hirsch Performance Fund was down -0.73% for the
month of April.
I consider myself exceptionally lucky having had very
few occasions in my long career requiring a written Mea
Culpa. I will try making it useful but brief, so I can get on
with the fix.
It was apparent from the very beginning of the year that
there was a significant rotation afoot. Growth has been
working consistently during the current market cycle,
which has left few inexpensive or undiscovered growth
stocks worthy of investment. Thus, value style became
much more appealing. The transition occurred at
lightning speed, without giving investors time to adjust.
In the aftermath of the FOMCs first rate increase of the
current cycle, cyclical stocks got decimated as investors
worried the economic cycle would soon end. When it
became apparent by February that the FOMC would
not rush subsequent rate hikes, markets turned around
abruptly and chased oversold value cyclicals.
There are two issues to consider:
Quality Issue
The best performing stocks this year belong to
companies whose balance sheets were stretched to
the limit and whose very survival was questioned mere
weeks ago. A slightly healthier market environment, a
small improvement in commodity outlook and a few
equity issues later, and all of a sudden these companies
are considered attractive turnarounds! I would never
own these stocks under any circumstances. Remember,
excellent management and clean balance sheets are
the most important requirements for my stock selection
process. I would never buy a company on the brink of
extinction, even in the most rampant bull market. These
stocks seem utterly inappropriate in the current fickle
market environment which seems totally dependent on
a few words from the FOMC statement.
Sector Issue
Because there have been several false rallies in recent
past, I waited too long for the certainty that both Gold
and Oil prices have found a bottom and embarked on
a new cycle. In hindsight I was excessively cautious -

HIRSCH PERFORMANCE FUND

understandable given the volatility and lack of clarity
in the markets. However, I have to take full blame for
being too slow implementing strategy changes in the
portfolios once I felt satisfied that both commodities
formed a buyable bottom. Was I waiting for a pullback, a
better entry opportunity? Sure. Mea Culpa. Mea Ultima
Culpa.
This year reminds me of 2009. After one of the worst
bear markets in history, I expected investors to embrace
investments of the highest quality. Instead, we had a
dash for trash then, similar to the current one. Coming
out of 2008 with a defensive portfolio, I lagged the
market performance then too. Looking back at the
performance record, I eventually got on track. I am a
gradualist and will take time to right the portfolio. I have
begun increasing the weights in Gold and Energy sectors.
As these sectors are inherently volatile, I am buying only
quality companies to ensure relatively low volatility of
the portfolios even during the inevitable corrections.
Unlike 2009, we are in later stages of the current cycle,
and rotation into cyclical sectors would certainly seem
appropriate. None of us has ever managed through a
cycle with such weak economic growth. Cyclical stocks
can perform extremely well in the latter stages of a
cycle, when economic growth is robust. Even though
that is not in the cards for the coming year, a case can
be made for having exposure to both commodities.
Gold is a logical investment given negative interest rates
in many parts of the world. The depth of the Oil bear
market has created some attractive opportunities in
the Energy sector. However, given weak global growth,
expectations for peak commodity prices need to be
tempered. My strategy is to keep commodity sector
positions concentrated in a few high quality stocks with
ample liquidity so I can easily adjust my weightings in
either direction as market circumstances dictate. I will
update on my progress in the May commentary.
Thank you for your continued interest in the Fund. For
further information, please contact your regional Arrow
Capital Management representative.
Sincerely,
Veronika Hirsch
Portfolio Manager
Arrow Capital Management Inc.

Commissions, trailing commissions, management, performance and other fees may be associated with this investment. Investors should read the offering memorandum before investing. Unless otherwise stipulated returns are for
Series A units in Canadian funds. Except as otherwise noted returns are historical compounded total returns including changes in the unit value and reinvestment of all dividends or distributions and do not take into account the sales, redemption, distributions or optional charges or income tax payable by the investor that may affect the compound growth
rate and are not intended to reflect the future value of the fund. Past performance may not be repeated. Offering of units
in the Hirsch Performance Fund are made pursuant to the Confidential Offering Memorandum (OM) only to those investors who meet certain eligibility or minimum purchase requirements. Important information, including the funds fundamental investment objective is contained in the OM which may be obtained from Arrow Capital Management Inc.
36 Toronto Street, Suite 750 Toronto, Ontario Canada M5C 2C5 Tel: 416.323.0477 Tel: 1.877.327.6048 Fax: 416.323.3199 www.arrow-capital.com

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