Upslope Capital’s Q1 2022 Investor Letter


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Dear Fellow Investors,

Upslope’s objective is to deliver attractive, equity-like returns with significantly reduced market risk and low correlation versus traditional equity strategies. Q1 was a volatile, but relatively favorable environment for Upslope’s approach, which skews towards defensive, value-conscious investments. This has continued into April, as Upslope is now up year-to-date (vs. -7% for the S&P Midcap 400 index) as of this writing.

Upslope Exposure & Returns1

Benchmark Returns

Average Net Long

Net Return

S&P Midcap 400 ETF (MDY)

HFRX Equity Hedge Index

Q1 2022

66%

-0.3%

-5.0%

-0.3%

Last 12 Months

64%

+5.9%

+4.1%

+8.9%

Since Inception*

47%

+10.0%

+11.6%

+5.0%

Note: clients should always check individual statements for returns, which may vary due to timing and other factors.

*Since Inception returns are annualized.

MARKET CONDITIONS – REGIME CHANGE

Q1 had it all: a speculative growth bust, war, inflation/commodity crises, rising rates, lingering pandemic issues, and a briefly inverted yield curve. The only thing missing: an above-average correction in the stock market. In February, the S&P 500 bottomed at almost -14% YTD – dead in-line with the average draw- down for the market since 1980 – and closed the quarter just -5%. With a macro and geopolitical backdrop seemingly much worse than “average,” it’s hard not to be impressed with the resiliency. I’m not sure if this bodes well or ominously for the period ahead. On the one hand, stocks rising in the face of bad news historically suggests that bad news is priced in. On the other, we’ve had multiple episodes since January 2020 where stocks didn’t care about bad news until…they suddenly did.

“Regime change” continues to be the theme of 2022. Regime change in financial markets and regime change geopolitically. In financial markets, we saw a hard shift from growth to value stocks early and a persistent step-up in inflation. These are big, broad changes to trends that have lasted, by some measures, 10+ and 40+ years, respectively.

Given the violent undercurrents in markets, opportunities abound – both long and short. Many SPACs and other speculative growth stocks have whipped…

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