Roubaix Fund Composite commentary for the year ended December 31, 2021.
Q4 2021 hedge fund letters, conferences and more
The Roubaix Fund Composite, a fundamental long/short equity strategy focused on small and mid cap U.S. stocks. During December the Composite generated a net return of +1.73% relative to a return of +1.85% for the HFRI Equity Hedge (Total) Index and a total return of +2.23% for the Russell 2000 Index. On a full year basis, Roubaix has generated a net return of +14.36% compared to the HFRI long/short equity hedge fund peer group return of +11.96% and the long-only Russell 2000 Index total return of +14.82%.
Equity markets were strong during the fourth quarter and the full year. However, the dynamics underneath the surface were remarkably divergent. Large cap stocks measured by the S&P 500 rose 28.7%. The returns were skewed by gains in a mega-cap stocks which have proven to be great businesses with strong growth and robust cash flow. Removing the largest 10 companies in the world, the 2021 S&P 500 total return falls to 18.2%. The divergences were even larger in small cap stocks. The Russell 2000 Index total return was 14.82% as small caps significantly underperformed their large cap peers. Further, 40% of the Russell 2000 Index finished the year in negative territory and a third of the index ended the year more than 40% off their highs. This factor drove the outperformance of the large cap S&P 500 versus the small cap Russell 2000 to a new post-financial crisis high. We believe these divergences create compelling opportunities for both small caps overall and our long/short equity strategy during 2022.
