The Tantallon Fund is a Cayman Island vehicle which invests in listed equities in the Asia Pacific region. The fund targets a concentrated portfolio of 35 names, with a 3-5 year investment horizon. At the portfolio manager’s discretion the fund may hedge its market and currency exposure, and short sell individual securities.
In the 10 years since the fund’s inception the un-hedged long book of the Tantallon Fund has returned an annualised +12.2% compound. The net return is a significantly more pedestrian +7.2%. While the ability to go short protected the fund somewhat in the latter half of 2008, our experience since then, in the face of persistent intervention by regulators and central banks, has been consistently bitter. In mid-2012 we concluded that shorting was detracting from our ability to travel and research companies and resolved to discontinue the practice. However we saw little upside in surrendering the option and we retain the flexibility to hedge. An investor’s equivalent of the Hippocratic Oath, First, Do No Harm, is a discipline we have attempted, with modest success, to apply when looking at either market or individual stocks on the short book since then.
(Click on each month's data below to read the monthly pdf report)
The fund declined -1.3%, leaving us down -14% for the year. Regional market indices fell in excess of -8%.
We should have made a fortune in October and this result is hugely disappointing. Why I neglected Korea, which would have paid by far the most substantial dividends, is hard in retrospect to justify; Singapore was a poor proxy for regional weakness. We were nonetheless +2% to the good most of the month, despite sharp weakness in our small long book (-5.88%), before seeing those returns slide in the last 48 hours as the short book (+3.93%) gave back some of its earlier strength, and currency gains in AUD (and especially JPY) moved against us. FX contributed +44bps and futures +20bps. Our positions in Reliance (weaker on Trump’s decision to oppose the IMO 2020 sulphur restrictions), SBI Holdings in Japan (-20%), and Pengana Capital in Australia were our most significant losers, while MMG and Melco, two names we re-entered prematurely in what I now think was a vain attempt to position the fund for some rally in risk, also detracted. Prada, Sun Hung Kai Properties and Sands China led our gains on the short side.
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.
Portcullis Trust (Singapore) Ltd
Morgan Stanley & Co. International plc /
PricewaterhouseCoopers LLP