Hedge Fund Perspectives : A Very Happy Halloween

It felt like ages since I caught up with this hedge fund friend of mine and it has been. For you see, it is easy to drift apart from good friends who have moved on to a different league and start to feel a little overawed in their presence but in our cases, its mostly because he was busy working and I have been busy doing the opposite.

In any case, I came home after drinks to a session of soul searching and contemplation before deciding to sit down and do what I have been doing for the past 2 years, to write another article that not many people are going to read.

Hedge Funds in 2014

Well, its been a tough year for macro funds and those who had made, reaped huge profits but the rest performed dismally. Funds that stuck to programmed methods have faired poorly whilst big fund managers that adapted to flexible trading mindsets, flipping from longs to shorts and vice versa, in fx and the S&P futures were the ones who scored big gains.

2014 has been a year where it is pointless to go after the small fish. Asian traders find themselves trading the EUR, JPY, AUD and rest of the majors. Evident in that a major broking firm in Singapore has closed down their formerly highly profitable exotic interest rate options desk because nobody bothers with the SGD or MYR these days. Only India is excepted and he has some bets there in the form of an exotic double up range structure, paired with a totally uncorrelated asset which I cannot remember now.

Himself an Asian currency expert said he has not touched SGD for the past 2 years now whilst busy checking his phone for the US GDP numbers last night. With only 2 hours of sleep the night before, he looked none too weary, living off the adrenaline rush of the bounty he scooped the night before with the FOMC in both the S&P as well as the USDJPY.


His view is that the world markets have decoupled, all off on their own tangents.

Equities behaving like it ain’t over till the Fed lady hikes. Bonds pricing in some measure of hikes but still sustaining their low yields on the lack of supply (only in treasuries). The corporate high yielders are regaining momentum on the ECB and BoJ QE’s.

His view is that 2015 will be a roller coaster of a year for stock markets because we will live by the Fed meetings anticipating the hikes. Japan will be a nightmare because of their mid term elections and the long USDJPY trade will be under threat so its best not to stretch the options too long.

The US mid term elections will probably see Obama the president of a hung government but it does not matter because there will be no debt ceiling this time.

He thinks the S&P will break a new high before year end as the hedge funds go back in after the earnings season. This is mainly for 1 reason – stock buybacks, which have been put under wraps during the earnings announcement and we should all get prepared for another massive buyback exercise and he is not aware of IBM’s $ 5 billion buyback announcement 2 days ago.

And he does not agree with my commodity story purely from the commodity prices perspective and trading. He thinks its the end of the commodity super cycle and prices will not go anywhere but he does not have an opinion on equities. Gold is lightly supported at 1185 but if that goes, it spells death. (Gold broke today)

Forex is still the way to go in 2015 with markets see-sawing between central banks and their policy actions or inactions or madcap experiments.

One thing we both cannot fathom is why does the BoJ think that by forcing their pension funds offshore to invest will end up helping the Japanese economy.

Enough said, I guess.

The Hedge Funder’s Life

Personal investments do not matter to him at all, and he is just sitting on all cash. In house restrictions make even buying a commercial property impossible and the fund managers are well rewarded for their profits. Citing colleagues who reaped hundreds of millions last year for the fund and getting a double digit percentage pay out, there is little need nor time for them to worry about their own private investments.

See, it is a different world and ball park as far as I am concerned.

Not so much belittled or humbled, but more inspired as I watched him move hundreds of millions casually as we downed drinks. I could have never done that even when I was at work. And the fat profits that came with it because I have developed a track record as his lucky charm which, incidentally, followed through into today for a very happy Halloween for an old friend.

smiling pumpkin 1