- Fund not afraid to buy when there's ``blood on the streets''
- Long-term investments in big data, medical services paid off
One Hong Kong-based based hedge fund returned 11 percent in August after bets on unpopular stocks paid off, as Asia-focused peers had the worst month in more than three years.
Last month’s returns extended the gain by Harbour Capital’s Asia ex-Japan equity long-short fund to nearly 27 percent so far this year, said Chief Operating Officer Geoffrey Chen.
As concerns about an economic slowdown in China rippled through global markets, the MSCI World Index plummeted 6.8 percent in its biggest monthly decline in more than three years. Hedge funds run by Bridgewater Associates, Greenlight Capital and Winton Capital Management were among those that lost money for the month.
A low appetite for risk has led investors to pile into the same types of "safe" investments and themes, Chen said. Harbour Capital is a fundamental stock picker seeking market leaders trading at valuations it deems cheap, often betting on "unloved names," he said. Its returns in August and since the start of the year were driven by long-term investments in the big data and medical services industries, not short-term trading or bets against Chinese stocks, according to Chen, who didn’t identify any current holdings.
“We know our companies extremely well,” said Chen. “We’re happy to not only be large investors but also buyers when there’s blood on the streets.”
The average Asia-focused hedge fund lost 2.7 percent in August, the worst showing since May 2012, trimming this year’s gain to 3.9 percent, according to Singapore-based data provider Eurekahedge Pte.
The Harbour Capital fund has returned 79 percent over the three years ending August, a period during which the MSCI Asia-Pacific Excluding Japan Index lost 3.4 percent, said Chen. It made money in each of the last three months when the Eurekahedge Asian Hedge Fund Index declined.
Harbour Capital was founded in 2010 by Chief Investment Officer Arnab Sen and Chen. Sen invested for Nezu Asia Capital Management, an Asia-focused hedge-fund firm backed by billionaire Julian Robertson. Sen once ran a fund betting against overvalued stocks for Nezu, a skill that has helped Harbour Capital hedge against losses, said Chen, who had led an Asian family office.
One investment that paid off in the past year was CJ Korea Express Co., a provider of land and marine transportation as well as logistics services that is expected to benefit from the surge in South Korea’s e-commerce industry, Chen said.
Investors and banks dropped the stock after it experienced integration issues following a 2013 merger. Harbour Capital built up the stake over as many as eight months after its research showed its operating profit could be more than 30 percent above banks’ estimate and its business was turning around. The stock gained 96 percent last year, contributing nearly 4 percentage points to the fund’s after-fee return, said Chen.