The fund rose +6.57%, taking our full year to +42.34%.
Gains in July were driven principally by our positions in Australia (Fortescue), Korea (our fuel cell names, and Samsung Electronics) and the US, where SEA once again trumped returns adding nearly 2% to NAV alone. The total equity book returned +5%, we made an additional +2.5% in FX (EUR and NOK, offset by small losses in the AUD which we have closed), and we frittered away -92bps in futures as our net exposure was reined in modestly to the high 70’s.
July was characterized by vibrant numbers from some of the world’s largest companies, and a corresponding surge in their valuation, with Apple, the world’s largest, leading the way with an 11% surge on its quarterly results which left the S+P barely changed on the day. Having camped out opportunistically in both AAPL and Microsoft for a few months early in the second quarter we have moved on, driven by an increasing conviction that we could find better upside in an albeit fairly limited part of the Asian universe. Earnings from two of our top five positions deserve comment, with Fortescue reporting final quarter numbers of record shipments, record costs (US13/tonne) and record selling prices (US81!). China steel production continues to accelerate, and worsening Covid in Latin America and Africa makes the market skeptical of any supply response, and pushes spot iron ore to US120/tonne, comfortably beating gold as the commodity of the year (and with none of the speculative length).
These are extraordinary times; we hope that you and your families are healthy and safe.
The Tantallon India Fund closed up +5.64% in July, as market sentiment and risk aversion waxed and waned between heightened concerns over further Covid-19 outbreaks and potential lockdowns compromising the real economy, buffered by expectations of even more aggressive policy relief and stimulus that would be supportive of underlying asset prices.
The tug-of-war being played out in real time captures the seemingly inexorable re-rating of tech, e-commerce, and the new ‘green’ superstars, and the palpable weakness in the US$, in part owing to the specific intent and policy actions by the US Federal Reserve, but, primarily, due to markets starting to internalize (i) concerns on rampant Covid infections in the US, (ii) myriad policy mis-steps as Congress, the White House and China indulge in cynical brinksmanship ahead of the elections in November, (iii) a burgeoning deficit as the spending spigot remains open, (iv) falling real bond yields juxtaposed against the tailwind for gold (for all the hope and the hype surrounding Covid vaccines and treatments, governments and central banks seem irrevocably committed to maintaining loose monetary and fiscal policies for the foreseeable future).
The fund rose 7.9% in July on the back of generally strong markets and our exposure to the particular strength in emerging market tech, global renewable energy and the China A-share market.
Tech financial results continued to recover in the second quarter despite the negative economic effects of the pandemic. The Greater China semiconductor industry saw several companies post all-time high financial results. This group of companies not only featured heavyweight TSMC but also our largest holding eMemory. The firm delivered 30% yoy revenue and 52% EBIT gains in 2020Q2 on the back of a 42% jump in foundry royalty income. eMemory is not only seeing a recovery in wafer volume for LCD drivers and power management ICs but also generating more leading edge 12” business by having its memory IP embedded in processors and communication chips.
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$37 million
YTD results : +42.34%
Lifetime results : +169.33%
Current AUM : US$18 million
YTD results :-13.32%
Lifetime results :+3.52%
Current AUM : US$14 million
YTD results :+20.1%
Lifetime results :+39.9%
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.