The fund declined sharply, losing -8.4%, underperforming weaker regional markets by a wide margin. We are now -5.16% for the year.
Given that I had anticipated a shift in market sentiment this result was extremely disappointing. I was insufficiently aggressive in increasing our short side exposure, somewhat rusty and sluggish after a long hibernation. And I was particularly slow to recognize that I had a great deal more China risk in the portfolio than I had thought. Finally, our JPY position, which acted well as a risk-off balance to the portfolio in the 1st half, is now instead magnifying the weakness. We lost -2.59% in the JPY forward, -2.67% in Hong Kong (principally a 20% fall in Melco), and -3.1% in India, where a 30% fall in Aegis accounted for 80% of the drawdown.
The Tantallon India Fund closed down -5.58% in June, after expenses, bringing the second quarter to a very disappointing close. Since the Fund’s inception, this is the fourth drawdown in excess of 10%; clearly, very uncomfortable, and reflecting heightened risk aversion globally, and specifically, the sell-off in small and medium sized companies as markets look to recalibrate risk/reward
The fund finished the month down 2.2%, following the 2.3% drop in the tech index, which fell more than the overall markets. While the sustainability index only retreated 1.1% in the month, the renewable energy sector was hit hard by changes in the subsidy structure in China instituted as the end of May.
The fund is down 7.2% for the first half of the year which compares to an overall market decline of just 1.5% and a tech sector that has continued to power ahead on the back of solid earnings, cash-flow generation and buy-backs particularly for the leading software and internet platform companies.
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$35 million
YTD results : -5.16%
Lifetime results : +131.29%
Current AUM : US$36 million
YTD results :-16.65%
Lifetime results :+25.26%
Current AUM : US$13 million
YTD results :-7.2%
Lifetime results :+15.5%
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.