The fund rose +1.8%, sharply under-performing the 6%+ surge in regional markets.
We entered January fairly fully hedged, and with the currency volatility of the first few days of the new year handing us gains of 3%+ I felt we were on the right track, expecting the surge in the yen and the collapse in the AUD to be reflected in equity markets as the region re-opened. My hopes for Armageddon were quickly dashed, and although our long book performed reasonably well (+5.2% in aggregate, led by ThaiBeverage and Melco), the drag from Korean puts and a futures hedge against our HK positions detracted -2%, and our short positions in LVMH, Kering and Burberry, all of which were closed early in the month, cost a further -1.1%. Our positions in the AUD and the JPY cost 25bps.
The Tantallon India Fund closed -6.16% in January; the volatility in global markets and rising risk aversion has served to aggravate fragile investor sentiment over the outcome of the upcoming General Elections, towards smaller and medium sized companies, and in particular, over loans made to major shareholders with pledged shares as collateral.
The irony of course is that the recent sell-off has had very little to do with business fundamentals – consistent high frequency data-points and the December quarter earnings releases would affirm that we are at the start of a new investment up-cycle, credit growth and profit margins are inflecting higher, the correction in energy prices would seem to have nudged inflation (and inflationary expectations) lower, and valuations are increasingly attractive relative to our benign outlook on inflation, and on the prospects for sustained growth.
Global and Tech markets staged a sizeable rebound in January advancing almost 8% during the month. We decided not to participate in the tech rally and maintained cash at over 50%. While we lost a bit of sleep over this decision as the SOX rocked as much as 10% during the month and our favorite funnel stocks did as much or more, we remain of the view that there is a further down leg to this tech correction as overall sector earnings start to fall YoY in 19Q1.
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$30 million
YTD results : +1.80%
Lifetime results : +100.00%
Current AUM : US$29 million
YTD results :-6.16%
Lifetime results :+8.88%
Current AUM : US$11 million
YTD results :+3.1%
Lifetime results :+10.2%
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.