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 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.
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