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CC-Transcript

  • 00:00Let's start there. Your market and you gave it so no view. This is exactly the type of market you're the type of fund. Your fund would really I guess shine. Let's take us through. Let's get started. How is your fund done this year. So right now we're up close to 10 percent and you know thanks to the volatility we in a we like environment where there is a lot of imbalances for supply and demand because we arbitrage basically the imbalances of those you know a lot of funds. I was a risk cutting the past three months especially. We've seen a lot of deleveraging. We've seen a lot of risk cutting a lot of very defensive forces which has caused market to dislocate a lot. We tend to like that kind of environment because that's where we come into to trade into the equilibrium of supply and demand. OK. So what looks mispriced to you right now globally. What's the best trading strategy at this point. I feel like this market is perfect for focusing on the most liquid products on the shortest term as possible because there is still a lot of short gamma and a lot of liquidity risk being built in this market. A lot of uncertainties I would say still has the potential to kick in for example like Russia and Ukraine. We still do not know where it's going to end up. I mean we could really have a big rally if this is solved or we can have a massive tail scenario again. If this escalates. So you know I think the best way to be defensive is focusing the most on the most liquid product and the shorter s shorter term as possible. And I think you know China is definitely a great place to invest right now. Huh. Walk us through the China playbook now. William how did you reacted to the news that we saw last week. The state council meeting. It seems like they're changing tact on almost everything. Does that mean that you're putting money to work in China now. Yes of course. So for the first time in a year we start to look into positioning ourselves into China. We look into you know owning a toll position when it rallies a lot. So I think China they almost made a 180 degree reversal basically from the policies they've been implementing the past one year. There is a lot of regulatory risk before which has caused a lot of investors globally to not want to put money in China. So it has underperformed the market for one year. People like pension funds people like hedge funds asset managers in Europe in U.S. in Asia even have pulled money out of China. So this massive rally and switch in their stance towards technology towards monetary easing I think will cause a lot of you know rally catch up. People will feel like they miss out and a lot of people will try to catch up also. And you know with the regulatory problem easing a lot of money will want to flow back to China. I mean this has stopped a lot of investors from flowing into China. So I think China this time around is really a great opportunity. A lot of the technology stocks are still trading at at value stocks valuations. I mean they have been hammered for so long that I think you know a policy change is the only thing they need right now especially with China government working on their audit with the US government to make sure that even offshore listing is is doable. So are you focusing mostly on the tech space in China William. Or are there other areas that you think are still looking mispriced in the mainland. I think a lot of the industries in China are quite mispriced by technology technology I would say has been the one in focus the most especially for this time around. Mm hmm. OK. I mean there is still a lot of lies to the order mean Bill I mean I mean yeah certainly there is this dip that we're seeing across China. You know you mentioned that you're buying this dip. Well I mean the Fed is embarking on a quite an aggressive tightening cycle. I mean some of the parts of this yield curve you look at the 3s all the way to tens we're basically they're at parity or inverted. How does that change investing conditions right now. Well I think the curve could stay inverted or can invert even more so there is still again like I mentioned there's a lot of tail events in built. You know things like that recessionary environment in the future that is totally possible. So I think the key is to stay defensive. I would not really call this market to stay or long. I don't think that's a wise call actually. I think the way to do it is basically be defensive and allocate money where you know where things are more undervalued and more defensive. So things like gold for example I think it's a good inflation hedge. Things like yes this David. Yeah. OK. I'll be. Yeah. Continue your thoughts you like gold and what would be a guest a trigger that would make you I guess pivot from being more defensive more liquid and more short term. I think I think right now a lot of things that are still uncertain we still have to wait for that to be over before we start to reposition ourselves. A lot of funds are still quite short Gamma. So. So what that means is if market goes back down to a new low you know a lot of people will start to need to hedge and unload more risk. So I think there is still a chance where that could happen again. So that's why you know we still should be very careful in this market. In my view. William you mentioned about the Russia Ukraine situation is not some that's just going to go away anytime soon. What sort of maybe medium term strategies are there then. Do you focus more on the commodity space. Is that how you can continue to catch up or catch on this trade or follow this trade. Or is there some that you need to fade too. Well in my view I think energy is still underpriced at this moment especially from when oil has you know sold off back to ninety five dollars from hundred thirty and now is selling slowly rallying back up. I think energy is still a good sector to focus on. I think this energy risk you know the decrease in supply it's not going to go away anytime soon even with the truce between Russia and Ukraine. I think the sanctions will still hold. We don't know how long it will hold. But I think you know the creation of supply in energy does not happen overnight. I mean it takes time. It takes a huge amount of hundreds of billions of investments in order to create more supply in the energy space. I think you know the shortage of supply versus demand will still be there.
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R Squared Global Warner on Volatility, China Policy

  • Bloomberg Markets China Open

March 21st, 2022, 3:30 AM GMT+0000

R Squared Global Founder and CIO William Warner says the volatility we've seen in the past few months has presented the firm with more opportunities to capture. R Squared Global is a market neutral quantitative fund that uses arbitrage-like strategies. Warner speaks to David Ingles and Yvonne Man on "Bloomberg Markets: China Open". (Source: Bloomberg)


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