The fund declined -2.42%, stretching our drawdown to -12.96% year-to-date. We again underperformed generally flat regional indices.
As has been the case for the last several months, early gains driven by our few short positions dissipated, in September’s case largely due to a further melt-down in India, which I had to some extent anticipated, but had done insufficient to ensure against. Despite having halved our largest position, Kotak, exited Reliance Industries and substantially over-hedged our rupee exposure, India cost in aggregate -2.56%, as the financial sector got slammed on a surprise default by a state-owned finance company, dragging Kotak sharply lower. Aegis Logistics, a name I refuse to trim, (and now our largest holding) also fell heavily in thin trading, with the market seemingly fretting at the delay in announcement of new terminal developments, anticipation of which had won the stock a growth multiple which is now contracting. While this volatility in one of the few clear domestic growth stories has been greater than I had expected, I remain confident in sticking with a commitment to this market, and in the early days of October have in fact committed new capital, raising our stake in Kotak once again and buying back Reliance. I have also, somewhat more nervously, removed our rupee hedge, with modest profits, although the potential implications of the fallout from the astonishingly stupid Saudi murder of Kashoggi on the oil price continue to concern me.
The Tantallon India Fund closed down -12.87% in September, after expenses.
It’s been a very tough month, with India continuing to be an outlier in the context of global equities with country risk premiums spiking (CDS spreads are up to about 150bps, the rupee is down 12% y-t-d versus the US$), and intensified foreign institutional selling of equities and fixed income (amazingly, calendar year to date, net foreign portfolio outflows of US$11bn now exceed the prior ‘record’ outflows of US$10.2bn in 2008!).
The good news for September was that the fund was up 1.2% and for the first time this year outperformed the peaking indexes on the back of AMD and positive momentum from the EV supply chain which lifted battery materials, component and cell makers.
The bad news is what has happened since then as I am writing this comment on the 11th of October and we exited September only with a 13% cash position despite being concerned about the toppy memory market for several quarters and hailing the memory price as a signal of what is to come for broader tech.
There is so little information on Iran you cannot even find the Teheran Stock Exchange on Bloomberg. Yet this is an exchange with a market cap of US170billion, turning over up to US150m/day with zero foreign participation, entirely on the back of domestic mutual fund and retail investors.
In Lv’iv on the morning of my departure I attended the funeral of one of the casualties of the “anti-terrorist operation” in Donetsk. Loudspeakers relayed polyphonic chant from impressively hirsute Orthodox clergy to a cluster of old women and an honor guard, smoking furiously and in no mood to be photographed, waiting to transport the hearse the short distance from the altar to a waiting ambulance.
The Tantallon Fund commenced trading in November 2003 with US5.5m in assets.
In 2005 the Tantallon Fund was named Best Asian Hedge Fund and in 2006 Best Local Hedge Fund (Singapore)
We experienced explosive asset growth, with the fund soft-closing in October 2005 at US450million and hard-closing in January 2008 at US1.5billion. Peak assets, in all products, were US1.7 billion at the end of March 2008
During the financial panic of 2008 we waived 4 consecutive monthly gate-able events and re-paid US1.1billion to clients who needed liquidity, placing our client interests ahead of any business considerations.
The majority of fund AUM is currently internal capital.
Despite this extreme volatility in assets, our commitment to the business has not wavered.
Nick Harbinson and Alex Hill are the principals of Tantallon Capital Advisors, the advisory company to the Fund. We have known and worked with each other since 1990, and have between us over 60 years of investment experience in Asia. Experience in multiple market cycles has honed our ability to identify secular and cyclical economic trends, as well as catalytic triggers. We combine top-down macroeconomic themes with bottom-up stock picking, as well as complementary individual skills with deep sell and buy side industry experience and market knowledge.
Current AUM : US$32 million
YTD results : -12.96%
Lifetime results : +112.26%
Current AUM : US$30 million
YTD results :-28.14%
Lifetime results :+7.99%
Current AUM : US$14 million
YTD results :-4.0%
In total, our principal investment team has over 80 years of experience in investing and financial markets. On average, our investment professionals have over 27 years of experience. The team today has weathered good times and bad times, bull and bear markets, staying together and remaining committed to our goal of achieving superior investment returns over the long term for our clients. Collectively, we are also significant investors in our funds. Our personal interests and those of our clients are completely aligned.