Tough Long/Short Asia Times Coming
"The Markets can remain irrational longer than you and I can remain solvent."
John Maynard Keynes, British economist (1883-1946)
Global stock markets have started the first six months of 2010 on a very tenuous footing. Within Asia in particular, and per MSCI/BARRA data on a YTD basis, stock market performance has been largely negative: Australia -19.21%, Hong Kong -5.33%, Pacific ex-Japan -14.67%, Japan -3.53% and Singapore -3.43% to name a few.
The performance picture across hedge funds that trade Asian markets has also been largely disappointing. Most "winners" rode higher the spotty positive beta performance of Japan, only to suffer in May when the so called "risk trade" was taken off and monies fled stocks and flowed into U.S. Treasury bonds as a safe haven as well as into gold. Australia took it the hardest as the incumbent government made a high profile campaign to impose a stiff surtax on mining company profits.
According to the mid-June data accumlated on a number of hedge funds tracked by HSBC Private Bank in their Hedgeweekly #26 report, the average performance of Diversifed Asia equity funds was -1.53%, with some in China taking a particularly hard beat-down as the policy makers there have taken an increasingly hard line against inflationary pressures in on the lending side. This has inevitably led to a modest downward revision of domestic growth and production projections, which in turn has led to downside revisions in stock prices in the public markets.
That said, there have been a few positive stalwarts such as Bob Karr's $2.1 billion Joho Fund Ltd. which was +7.79%. Japan equity diversified funds returned +1.48% led by the Henderson Japan Absolute Return Fund Ltd +7.09%, while some bigger global players like Brevan Howard's Asia Fund Ltd returned -0.36%.
On a global basis, clearly there is still a lot of macro factor correlation with developed markets (which suffered heaviest over th elst 6 months - led by Europe). This goods and services correlation continues to bleed into the portfolio asset markets making the waves in Europe and the US still hit the shores of Asian markets. It will continue to do so, until, at least those emerging economies have a significant scale of domestic private spending and consumptoin driving their production engines. We are probably still a good few years away from that, although the time will come.
Until then, as developed stock markets continue to meander lower, the risks remain that Asian markets and in particular hedge funds with long/short equity biases will also go lower in terms of performance. Now more than ever, all firms need to establish differentiated marketing plans to grow and retain assets with a particualr emphasis on capital preservation. If not, they can look forward to a bleak capital raising future. Nuture long term, institutional investors. Mahalo!
"The Markets can remain irrational longer than you and I can remain solvent."
John Maynard Keynes, British economist (1883-1946)
Global stock markets have started the first six months of 2010 on a very tenuous footing. Within Asia in particular, and per MSCI/BARRA data on a YTD basis, stock market performance has been largely negative: Australia -19.21%, Hong Kong -5.33%, Pacific ex-Japan -14.67%, Japan -3.53% and Singapore -3.43% to name a few.
The performance picture across hedge funds that trade Asian markets has also been largely disappointing. Most "winners" rode higher the spotty positive beta performance of Japan, only to suffer in May when the so called "risk trade" was taken off and monies fled stocks and flowed into U.S. Treasury bonds as a safe haven as well as into gold. Australia took it the hardest as the incumbent government made a high profile campaign to impose a stiff surtax on mining company profits.
According to the mid-June data accumlated on a number of hedge funds tracked by HSBC Private Bank in their Hedgeweekly #26 report, the average performance of Diversifed Asia equity funds was -1.53%, with some in China taking a particularly hard beat-down as the policy makers there have taken an increasingly hard line against inflationary pressures in on the lending side. This has inevitably led to a modest downward revision of domestic growth and production projections, which in turn has led to downside revisions in stock prices in the public markets.
That said, there have been a few positive stalwarts such as Bob Karr's $2.1 billion Joho Fund Ltd. which was +7.79%. Japan equity diversified funds returned +1.48% led by the Henderson Japan Absolute Return Fund Ltd +7.09%, while some bigger global players like Brevan Howard's Asia Fund Ltd returned -0.36%.
On a global basis, clearly there is still a lot of macro factor correlation with developed markets (which suffered heaviest over th elst 6 months - led by Europe). This goods and services correlation continues to bleed into the portfolio asset markets making the waves in Europe and the US still hit the shores of Asian markets. It will continue to do so, until, at least those emerging economies have a significant scale of domestic private spending and consumptoin driving their production engines. We are probably still a good few years away from that, although the time will come.
Until then, as developed stock markets continue to meander lower, the risks remain that Asian markets and in particular hedge funds with long/short equity biases will also go lower in terms of performance. Now more than ever, all firms need to establish differentiated marketing plans to grow and retain assets with a particualr emphasis on capital preservation. If not, they can look forward to a bleak capital raising future. Nuture long term, institutional investors. Mahalo!
posted by Franklin Scruggins | 4:39 PM
2 Comments:
We recommended to go to Hawaii for your travel
we all need to!
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