Originally published 26 May, 2020 in Bloomberg by David Ramli, Bei Hu and Nishant Kumar.
COVID-19 led economic turmoil has seen wild swings in equities markets since February, with few fund managers being able to consistently generate positive returns. Even funds with a bearish outlook that were able to profit as markets fell in March, were challenged to keep making money when large scale government stimulus revived markets in April.
Bloomberg analysis shows that, globally, only 13% of hedge funds were able to generate positive returns across both months.
Bloomberg contributors David Ramli, Bei Hu and Nishant Kumar spoke with APSEC Co-Fund Manager Nicolas Bryon to learn what factors helped the Atlantic Pacific Australian Equity Fund return 23.6% and lead the elite pack of profitable hedge funds through this volatile period.
Lessons Nicolas shared included:
- Trading disciplines for success during volatile market periods
- The importance of having the right tools for monitoring market movements and managing trading positions
- The value of staying hyper-vigilant at all hours to take advantage of both upside and downside positions in stocks like gaming giant Aristocrat Leisure Ltd., whose shares plunged 36% in March only to bounce 20% in April..
The article also shared further insights from some of the rare breed of hedge fund managers in Australia and internationally that were able to grow investor capital through this challenging period.
The full feature can be found here: https://www.bloomberg.com/news/articles/2020-05-25/only-a-few-hedge-funds-made-money-in-march-and-april-here-s-how
The timeliness of these lessons into profiting though volatility has also seen the article syndicated across a number of leading publications, including:
Australian Financial Review: https://www.afr.com/wealth/investing/only-a-few-hedge-funds-made-money-in-march-and-april-here-s-how-20200526-p54we3
Sydney Morning Herald: https://www.smh.com.au/business/markets/meet-the-aussie-money-manager-who-made-millions-as-markets-crashed-20200526-p54wdy.html
The article has also featured in leading international publications, including:
sina.com.cn (China): https://finance.sina.com.cn/money/forex/forexinfo/2020-05-26/doc-iirczymk3591031.shtml#
and
EL FINANCIERO (Mexico): https://www.elfinanciero.com.mx/mercados/pocos-fondos-de-cobertura-ganaron-en-marzo-y-abril
Keys to successful trading in volatile times
The APAEF is a long/short fund that was created with a core aim of capturing upside volatility while minimising downside volatility, a philosophy we believe will position us to outperform over the long term.
Rather than just chasing upside returns and selling down to cash as our defensive position (long), we pursue active hedging strategies to protect capital and also capture returns when the market goes down (short).
The key to the fund’s success through the March maelstrom that drove the S&P/ASX 200 Index down 21.2 per cent was a fully hedged portfolio – that was long stocks, short stocks and short share price index (SPI) futures – and the decision to hedge out risk over the weekends.
As prices rebound, the team continues to be hyper-vigilant in monitoring their trading positions, using HALO as the competitive edge in identifying opportunities to buy quality stocks that exhibit the pricing signals of being oversold.
In the longer-term, this risk management and proactive trading mantra has allowed the Fund to significantly outperform the market, while also smoothing out volatility during market downturns, as you can see below.
* Source APSEC May7, 2020. Cumulative returns since inception in June 2013 of the Fund are 9.6% p.a. vs the S&P/ASX200 Accumulation Index returning 6.1% p.a. as at April 30, 2020.
Stay tuned in coming weeks as we can continue to share more insights into successful hedging and trading strategies, or contact our team at any time if you’d like to discuss how you can protect and grow your investments through these turbulent times.
