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.
Viewpoints
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.
Happy Halloween!
I can only surmise that the Japanese pension funds are heading overseas to generate higher yields than their JGBs and to benefit from FX gains since the JPY is going down the drain.
More funds will be allocated to the domestic stock market so I suppose J-REITs will be the biggest beneficiary?
BOJ Targets 80t Yen Annual Expansion in Monetary Base
Oct. 31 (Bloomberg) — BOJ announces expanded easing.
• Bank to increase holdings of JGBs at annual pace of about 80t yen
• Votes on these 2 expansions passed by 5-4 majority
• ETF purchases to increase at annual amount of 3t yen
• J-Reits to increase by about 90b yen
• Both these are tripling of previous targets
Japan probably has the safest Reit market because their Reits are required to pay down their principal and interest annually which is an ultra conservative measure that protects the investor/shareholder against asset devaluation in times of crisis. http://52.77.202.71/market/reits-and-comparisons/
This situation is a result of Singapore’s lousy policy.
It enabled foreign funds in to charge high fees, depleting the citizens wealth. This is to be in-line with the low CPF returns.
For your info, MAS actually advised the insurance companies to reduce the returns so that it is similar to the CPF. Who is
managing the fund – the manager or MAS?
Doing a disservice to the nation.
In India, funds are not allowed to earn commissions.
In Malaysia, no foreign funds. Same in Australia, etc.
All develop their own capabilities.
Worst, trying to cheat the Sg public. Elsewhere, hedge funds are already accessible at least a decade ago.
You know many of these foreign funds has the idea, if it is a good product, they will want it to be based in their home country.
It is unfortunate that Singapore seems to be managed by incompetent people. They don’t really know how funds are run. Just look at what the banks are recommending.
Yes. Don’t buy Singapore insurance. Always buy in jurisdiction where consumer rights exist. Why do you think Singapore is a top arbitration centre ? Corporations have a higher chance of winning here. Banks and insurance companies have huge advantage here, along with the funds and scientists working under the A star umbrella.
Not sure about the funds and the incompetent people. Elsewhere almost the same and I cannot find a country where the people are unhappy about something or other, sometimes bigger things.
Not sure if you are aware, 140,000 Malaysian PMETs came into Singapore last year. Many are in finance. According to the CPF, they do not need to contribute to CPF making them cheaper to employ. Singaporeans are spending their wealth and sharing the returns with them.
Following is an extract :
Last year, a total 308,834 high-skilled Malaysians have moved overseas, with 47.2 per cent going to Singapore, 18.2 per cent to Australia,
12.2 per cent to US and the rest to other countries like UK and Canada.
According to Lim’s calculations, the emigrant professional could gain being based in Singapore for the first eight years before returning home and working in a similar capacity for the next five years.
Meanwhile, MAS created a lot of jobs through new regulatory requirements recently of financial institutions to cater to Malaysian freshly graduated accountants who were rejected by Australia under the migration program.
Of course this to me is a temporary situation as the economy is reaching a top.
[you might want to delete the link after reading]
http://www.thestar.com.my/News/Nation/2013/08/03/Malaysia-Au
Now Singapore try to delay her citizens from progressing through NS, etc. claiming there are too many already
http://m.topix.com/forum/world/singapore/TQHU8B3BHDOPQU6NC/p4
Well, they do contribute to the GDP of the country like the rest of the workers and if they do not contribute to CPF then they don’t get “retirement benefits”.
I am for hiring foreign labour where skills are in short supply and America has that problem now, with not enough workers of the right skill set. But there are many cases where expatriates are hired for other reasons eg. if they are more presentable and speak better. I don’t really want to judge in those cases.
I think the best is to expect nothing and get nothing, which is what I have been getting too ! hahahahaha
And as for the CPF ? I have never considered that mine at all. Small price to pay for a stable and safe society, I guess.