China hedge funds face worst month in nearly 16 years
China-focused hedge
funds probably had their worst month in almost 16 years in August amid
intense volatility in the country's stock market.
Tue, Sep 1, 2015, 9:23pm EDT - US Markets are closed
China Hedge Funds Face Worst Month in 16 Years After Carnage
3 hours ago
China-focused hedge funds probably had their worst month in almost 16 years in August, with firms including Orchid Asia Group Management and APS Asset Management Pte suffering losses from the nation’s stock market collapse.
More from Bloomberg.com: At 2 p.m. in China, the Stock Market Rescue Suddenly Switches On
Hedge-fund investors are getting an early glimpse of the carnage after market declines that began in China in June deepened and spread across the globe. Volatility in oil and concerns about slowing growth in China rattled markets worldwide and even hurt prominent U.S. hedge funds. David Einhorn’s Greenlight Capital declined 5.3 percent in its main hedge fund last month, according to an e-mail to investors. Leon Cooperman’s Omega Advisors and Bill Ackman’s Pershing Square Capital Management saw their gains for the year wiped out during the worst of August’s market decline.
“Greater China hedge funds are on track to show the worst three month returns in at least a decade,” said Mohammad Hassan, an analyst with Eurekahedge in Singapore. “It’s not a surprise given the funds’ limited ability to short the stock markets in China.”
More from Bloomberg.com: U.S. Stocks Tumble as China Slowdown Deepens Concerns on Growth
China
hedge funds were among the best performers in the industry before the
August rout. The Eurekahedge Greater China Hedge Fund Index was up 10.5
percent through July, compared with the 6.8 percent return for the Asian
Hedge Fund Index. Eurekahedge won’t have the year-to-date return for
China hedge funds through August until later this month.
More from Bloomberg.com: Only One Chart Really Matters for Foreign-Exchange Traders
Even
with the rout in August, APS’s Greater China fund was up 27.7 percent
this year through Aug. 28, while the Orchid fund fell 1.9 percent for
the year. The Shanghai Composite Index had fallen 0.9 percent in 2015
through the end of August.
Rare Profit
There
were firms that managed to shine during the market meltdown, thanks in
part to flexible strategies that allowed them to invest across global
markets. The $90 million True Partner Fund in Hong Kong, run by co-chief
investment officers Tobias Hekster and Govert Heijboer, surged 7.5
percent on Aug. 24, the day an 8.5 percent plunge in the Shanghai
Composite Index triggered a selloff across the globe. The single-day
jump for the fund, accounting for its entire month’s gain, brought the
year-to-date advance to 15 percent, according to Hekster.
The
True Partner fund used a relative value strategy that benefited from
rising market volatility that started in Asia and spread worldwide. As
options owned by True Partner in the Taiwanese market exploded in value
amid rising panic on Aug. 24, the fund sold them and bought cheaper ones
in Korea and Japan, Hekster said. The fund then was able to time the
sales of those options when their prices rose because of elevated
investor anxiety and buy cheaper ones when the markets opened in Germany
and elsewhere in the world.
“We
were able to roll our positions from where anxiety was high to places
where the anxiety was not yet at such elevated levels,” Hekster said in a
telephone interview. “The dominoes kept on falling.”
More from Bloomberg.com- If the Options Market Is Right, China's Stock Rescue Is Doomed
- Oil's Three Big Days Wipe Out a Month of Losses
- Global Stocks Cap Worst Month Since May 2012; Crude Oil Surges
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