Portfolio Themes:







It is a rather unusual structure, because we use leverage. We position the fund to take advantage of larger trends – and then, within those larger trends we also pick stocks and stock groups. So we operate on many different levels. I think it is easiest if you think of a normal portfolio as something flat or two-dimensional, as its name implies. Our portfolio is more like a building. It has a structure; it has leverage. Using our equity capital as the base, we construct a three-dimensional structure that is supported by the collateral value of the underlying securities. I am not sure whether I am making myself clear. Let’s say we use our money to buy stocks. We pay 50 percent in cash and we borrow the other 50 percent. Against bonds we can borrow a lot more. For $1,000 we can buy at least $50,000 worth of long-term bonds. We may also sell stocks or bonds short: we borrow the securities and sell them without owning them in the hope of buying them back later cheaper. Or we take positions – long or short – in currencies or index futures. The various positions reinforce each other to create this three dimensional structure of risks and profit opportunities… With our three-dimensional approach, we make decisions on different levels. There is a macro decision, a certain posture that the fund adopts. Within that macro posture, there are decisions about stocks to buy or sell and which instruments to use. Generally speaking, if we can implement a macro decision with a macro instrument, we prefer to do that rather than to do it through more specific investments.” ~ George Soros 

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