The fund slipped a further -4.4%, sharply underperforming regional indices. We are now down -10.8% for the year.
This was probably the most dispiriting month I can recall for several years. At one stage earlier in the month we were the better part of 2% up, having cut the balance sheet and flattened the book. But as regional markets, particularly Hong Kong, clutched at the straws of easier Chinese policy, the ensuing volatility of the short book compiled with further weakness in our residual long positions saw us losing money pretty much everywhere. India led losses with Aegis Logistics and Kotak Bank between them accounting for roughly half the monthly drawdown; in Hong Kong we were on the end of one of the ugliest squeezes I have yet experienced in the Chinese property companies, which forced me to cut exposure, and for good measure to downsize all our short-side positions, accounting for another quarter of the drawdown. The balance comes in dribs and drabs from Vallourec and our two positions in Australia, Pengana Capital, and OneView Healthcare in which we have a small (and now somewhat smaller!) position. About the only positives I can report were a recovery in Summit Ascent, our Russian casino, which I think is pricing Armageddon and which I haven’t reduced, and some offsetting gains in the Indian rupee, which prompted by ever-fiercer US data I have belatedly hedged.
The Tantallon India Fund closed down -2.30% in August, after expenses. The rupee weakness is the primary culprit (the rupee, -10% y-t-d versus the US$, is now Asia’s worst performing currency this year), caught up in contagion risk across Emerging Markets broadly, framed against the backdrop of US$ strength, and market concerns over higher energy prices being manifest in rising inflationary expectations, and Central Banks globally being forced to raise rates as the Fed continues down its path of “normalization.”
Somehow, lost in the general market malaise and the currency taking it on the chin, is the fact that India’s real economy grew 8.2% in the April-June quarter, the best quarter posted in the last nine, well ahead of consensus expectations of around 7.6% growth!
The fund gained 1.6% in August which outpaced the overall markets but fell well short of the tech index which gained 6.5% on the back of a 20% move by Apple, its the largest constituent. The August move also saw Apple break thru the USD1tr market cap barrier as the S&P hit new historic highs.
Our US tech holdings provided most of the positive momentum. IC design house Realtek was the only major contributor from Asia as cyclical fears are on the rise and increasing trade tension look likely to cause supply chain adjustments.
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$33 million
YTD results : -10.80%
Lifetime results : +117.52%
Current AUM : US$35 million
YTD results :-17.52%
Lifetime results :+23.95%
Current AUM : US$14 million
YTD results :-5.2%
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.