Last month Woodbine Capital, a quant based hedge fund, decided to stick to longs in USD versus JPY, in anticipation of a further decline in the yen’s value, and the hedge fund has gained in the position in the past two months, according to the latest performance numbers of Woodbine’s fund. Woodbine Capital’s thesis on USD/JPY is shared by North Asset Mangement, a UK based hedge fund. JPY is expected to weaken further after Japan’s central bank injects more rounds of monetary easing. Further uncertainty comes from how the selection of a new governor plays out.
Woodbine Capital is up 0.14 percent, net of fees, in November and up 3.33 percent YTD, while the returns for Q4 are up 1.75 percent. The positive performers in November were more or less the same as those in October. The fund profited from longs in USD vs. JPY, Euro stocks, and longs in Nikkei index companies.
Woodbine’s reasons for expecting a slide in JPY in comparison with USD through 2013 follow the same reasoning, that is the mid-December Japan elections and the subsequent appointment of a BoJ governor who will likely further the process of monetary easing. Going forward, the fund has increased its position in the currency. Based on the comparative weakness of JPY, Woobine’s investments in Japanese stocks are concentrated in those companies which can benefit from the above mentioned scenario, like exporters and financials.
In Asia (ex-Japan), Woodbine is also invested in Chinese equities, where it expects profits driven from growth in Asia in general, and China in particular. On the other hand, the fund is largely bearish on US equities and has reduced long positions in these stocks in anticipation of an unfavorable outcome of the fiscal cliff. The fund is going for put options and is maintaining relative exposure in S&P500, compared to high dividend paying stocks in the utilities sector.
In Brazil, the fund anticipates no stimulus that can raise the estimated GDP numbers, moreover, with further easing from central banks that is aimed at keeping interest rates at low levels, the fund has chosen to add a long position in Brazilian rates.
In Europe, the fund is long on Spanish short term treasury notes and the position was also profitable in last month. The fund is short on EUR vs. DKK, long in Finnish bonds vs. shorts in French bonds, long European stocks especially financials, and long in further cuts in European interest rates.