(Bloomberg) -- All it took for Formidable Asset Management LLC to beat the market in the first half was to get the effect of the coronavirus right. As a result, Formidable’s fund climbed 38.8% this year, gross of fees, beating most peers and significantly outperforming the broader market.
The Formidable fund, which correctly bet on what Covid-19 would bring, went long on VIX options in mid-January, reduced some equity exposure and bought put options on Nasdaq derivatives in early February, according to a letter seen by Bloomberg.
The VIX, which measures expected levels of volatility on the S&P 500 Index, spiked above 82 in mid-March from less than 14 a month prior.
The Cincinnati-based fund kept lightening up on stocks in February. It also added put options on companies such as Cinemark Holdings Inc. and OneSpaWorld Holdings Ltd. at a time when markets hadn’t yet priced in the potential impact of a pandemic-related downturn. Adding calls of stay-at-home companies and social media stocks such as Netflix Inc. and Facebook Inc. also helped the fund’s performance. Meanwhile, positions in gold mining ETFs and gold miners themselves also helped navigate the uncharted waters.
The CEO and managing partner of the hedge fund is Will Brown, who previously served as managing partner of BBK Capital Partners and senior vice president at Raymond James. The chief investment officer is Adam Eagleston, who was most recently portfolio manager at Driehaus Capital Management LLC.
Formidable’s outperformance comes just as the volatile market has taken a toll on some leading hedge funds. Ray Dalio’s Bridgewater Associates, for example, suffered a 15% drop in assets under management during March and April in the wake of heavy losses.
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