Dear Partners,

For the month of March, Caravel returned +2.04% compared to -4.63% for the benchmark (-4.98% for the S&P 500 & -4.28% for the SPTSX)¹. This brings year-to-date total net return to +6.60% for the fund and -0.19% for the benchmark, respectively.

As I begin this month’s letter on April 13^th, I am still thinking about the events of the past weekend. Not the failed negotiations between the US and Iran held in Pakistan, though we have thoughts on those as well. No, I am referring of course to Rory McIlroy’s successful defense of his Master’s title, becoming the first back-to-back winner of the Green Jacket since Tiger Woods in 2002. 

I hear the non-golfers groaning already. I will keep it concise. Rory’s win was a tale of two cities. On Thursday & Friday, he shot a cumulative twelve under par and carried a six-stroke lead into the weekend. On Saturday and Sunday, he shot even par and was effectively saved by the bell. This performance reminded us that in golf, there is a time for aggression, and a time to just hang on.

So it is with investing. The Iran war derailed many investment themes that had been working in the months prior to March 2026. Momentum trades rolled over, and those that lived by the sword generally suffered serious wounds. As any golfer can appreciate, reality can be volatile. The club you could rely on yesterday may be better off left in the trunk of your car today. It takes an 11% gain to recoup a 10% drawdown, while a 50% loss requires a 100% recovery. Just like golf – aim small, miss small. One of our fiercest points of pride over Caravel’s decade-long history has been our ability to mitigate the effects of market-level volatility on our portfolio.

March was another such example. Losses in our equity long-short positions (-2.6% gross) were more than offset by our credit & converts (+2.5% gross), merger arbitrage book (+1.6% gross), and shorts & hedges (+1.3% gross). As designed, our weakly correlated strategies picked up the slack produced by the aggressive deleveraging seen in the stock market. We took the opportunity to increase positions in core holdings at lower prices while rolling forward and monetizing hedges in order to maintain a protective posture against future tail risk.

So far in April, optimism has returned. We continue to see material risks to the overall market structure and are monitoring them closely. With that being said, we believe we have material positive exposure to continued upside in stocks this year through a 35% net exposure to equities (excluding merger arbitrage), up from less than 20% at the low point of the year in February. In March, we re-established positions in MDA and PNG at prices 33% & 21% off their respective highs, and in April we have selectively re-entered some positions in oil stocks after significant selloffs driven by hopes of de-escalation in Iran. While we believe de-escalation is certainly possible, we do not believe oil is going back to pre-war price levels any time soon.

We thank you for your continued support,

Jack and Glen

_{1 Benchmark = 50/50 weighting of S&P 500 & SPTSX Composite Indices}