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Only a few hedge funds made money in March and April. Here's how

Sydney

FATHER-OF-SIX Nicolas Bryon didn't get much sleep in March, but it wasn't family duties keeping him up. As global markets crashed, the Sydney-based hedge-fund manager rose every hour to check on his positions and execute trades.

After weeks of broken sleep, his Atlantic Pacific Australian Equity Fund was up 23.6 per cent for March and April, making it one of the rare hedge funds globally that made money in both periods. The two wildly different months messed with even some of the biggest money managers. In March, several bears reaped fortunes by betting on falling markets, only to lose money in April when government stimulus revived stocks.

Globally, just 13 per cent of hedge funds made money in both months, according to data compiled by Bloomberg. A number of those that did exhibited similar traits: an ability to trade across different geographies or asset classes and a hyper-vigilance toward monitoring positions.

"I'm generally quite conservative," Mr Bryon said, who manages around A$33 million (S$30.9 million). He favors firms with solid fundamentals that have restructured their costs and recapitalised through stock issues or loans.

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Mr Bryon said he watches 24/7 for any signs the virus may shut down economies that have just started to reopen, like China. That attentiveness allowed him to quickly tip out and in out of stocks such as gaming giant Aristocrat Leisure Ltd., whose shares plunged 36 per cent in March only to bounce 20 per cent in April.

AVM Global Opportunity Fund chief investment officer Ashvin Murthy has delivered annualised returns of 9.9 per cent since the fund's inception in 2016, below the outsized gains of some peers. But he sees no shame in being boring and produced a 3.02 per cent increase in March and another 3.14 per cent in April - his fund has made money in 11 of the past 12 months.

Smaller bets in right direction

For Mr Murthy, who manages around US$50 million for clients including family offices in Europe and Asia, making smaller than his usual bets in the right direction has resulted in larger payouts thanks to market volatility. He currently owns a lot of government bonds, and cash.

In late February, he made money by shorting equities and going long on the US dollar. By late March, when the Federal Reserve had started pushing through measures to add liquidity, he snapped up gold and investment-grade bonds.

"Most hedge funds that get the spotlight are the ones that are super levered so in a bull market, they all look sexy," Singapore-based Mr Murthy said, adding that he doesn't invest more than he's willing to lose - a risk-averse strategy quite different from the high-volatility plays Asia often sees. "I'm okay with being boring, I probably sleep better at night."

Other funds that did well in both March and April had China to thank.

Pinpoint Asset Management Ltd.'s nearly US$1.1 billion Pinpoint Multi-Strategy Master Fund increased 0.3 per cent in March and almost 1 per cent in April by holding onto its investments in some of China's leading companies.

"Covid-19 has negatively affected many industries," Pinpoint's Hong Kong-based investor relations manager Jennifer Wong said. "It's our belief that industry leaders, who have better access to resources, finances and human capital, will continue to gain market share at the expense of weaker peers." She declined to disclose specific names.

Pinpoint is bullish on stocks linked to China's 5G telecommunications network roll-out as well as online and offline education firms, including those that provide extra-curricular tutoring.

Panview Capital Ltd.'s Asia hedge fund also excelled in part due to China, rising less than 1 per cent in March and about 4.5 per cent in April. The Hong Kong-based firm, which began trading with external capital in January, cut India investments and shifted some of its portfolio to China instead, a person familiar with the matter said, declining to be identified because the details are private.

Here are a few others that made money in both March and April:

  • Ocean Arete Ltd., a Hong Kong-based manager that oversees US$1 billion, returned 2.1 per cent in March and 3.4 per cent in April. Its macro hedge fund started March owning risky assets, including global stock indexes, but cut those positions as equity markets began to plunge. As government stimulus measures kicked in toward the end of March, it rebuilt long positions in US and Chinese stocks to ride the April rebound wave.
  • CloudAlpha Capital Management Ltd.'s hedge fund advanced 1.9 per cent in March and 4.2 per cent in April, taking this year's gain to almost 49 per cent, according to a client newsletter. That was thanks to a bullish position in Tesla Inc. and some well-timed shorting of Luckin Coffee Inc.
  • Infini Capital Management Ltd.'s multistrategy hedge fund surged 33 per cent in March and rose another 25 per cent in April. BLOOMBERG

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