We talk to HCM Rapier, a global macro fund, on how it was up almost 2% in October when not only did markets fall, but also many hedge fund strategies. This brings the fund’s YTD returns past 10%.
Shun Hong Liu, Founder & PM:
“HCM should be up around 1.8% in October. The increase in volatility helps us as we short EUR, AUD, NZD and long JPY, KRW, INR, IDR. Please note that virtually all the currencies fell against USD but some outperform the others like IDR and INR, the central banks are hiking rates to stop the capital outflow while Australia and NZ central banks are happy to see their currencies fall. In short, we play our old tricks: 1) risk on/USD drops – we do not lose money as all currencies rose in tandem 2) risk off/USD rises – our longs will drop less due to central bank interventions and we made money. So with volatilities, we should be able to generate better return than traditional asset classes while if the market is still like 2015-2017 then we don’t make much money but we still churn out some returns.
I really believe that deglobalization is the long-term theme. To me, Donald Trump is not the cause. The popularity of right winged political parties has increased tremendously in the last 3-4 years globally so it is a matter of social mood. The inequality of wealth distribution due to huge asset inflation has created discontentment among voters and they decide to vote for politicians who will unwind the globalization process in the last 30 years. With this backdrop, we believe that inflation and interest rates will go higher, profit margin will shrink, geopolitical risk will rise and hence volatilities will rise across all markets. With this backdrop, it should be a lot more favorable to allocate to funds like us and CTAs while traditional asset classes, i.e. bond, credit and equity, should underperform. The process should be slow but all the election results show to me that it is very hard to fight against the trend.
”
For more information, feel free to email us at contact@hedgequery.com