Diamond Age Russia Fund: Monthly Letter to Investors – May 2012

+100% for the Russian market in 24 months – how?

In May the Fund lost 21.98%, slightly more than its benchmark, the MSCI Emerging Markets Europe Index, which fell by 18.58%. However, the Fund is still outperforming the benchmark and other relevant indices, such as the MSCI Russia Index and the RTS Index, from the 2011 market “local bottom” November 25th, 2011 to end-of-May 2012.

The Fund reduced its leverage to zero in May (and has 14% cash), and continues swimming closer to the shore for the time being. However, in this Letter to Investors, the Investment Advisor will put forward a game plan for positioning the portfolio to
a +100% appreciation of the Russian stock market within the next 24 months, provided a certain set of scenarios materializes. When “risky asset” prices, such as equities and commodities, are priced such that anything less than “the end of the world” is just not possible, “non-risky assets”, such as bonds, trade at levels not seen in decades, and as if they indeed were “non-risky” assets…


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