market folly

Below you will find the annual letter from Richard Perry's hedge fund Perry Partners International. Perry seeks to achieve low correlations to the equity markets while still delivering strong returns. Their annual letter focuses both on their performance from the past year as well as their outlook going forward. Turning to some of their specific positions, we see that they have been active in both the credit and equity arenas.

Credit

They built a position in General Motors unsecured bonds, GM corporate bonds (issued by the parent entity) and GM Nova Scotia bonds over the past few quarters. They also purchased claims in Delphi late in the bankruptcy process. They made a lot of investments in the auto and auto parts sector as they felt the potential upside far outweighed the downside.

Equities

They've been fond of managed care stocks but have scaled back their positions slightly to lock in gains. Managed care is still 5% of their portfolio though. They were also adding to their Palm (PALM) position on the fourth quarter sell-off. They believe Palm "has an excellent operating system and will continue to gain traction with the carriers. That being said, our fears around competitive pricing in the smartphone area led us to increase some of our hedges in this area." This is interesting as we've now seen Perry long Palm, and we had previously seen Whitney Tilson's hedge fund T2 Partners had been short Palm.

Perry Partners' investor letter in its entirety is a must-read. RSS & Email readers will need to come to the site to read the letter.




Great insight from Perry Partners and we look forward to following the developments of some of their positions. In the past, we had presented Perry's second quarter 2009 letter as well, so it's good to see their more updated insight. We've been posting a ton of hedge fund investor letters as of late, so make sure to check those out.