Woodbine Capital is one of the big gainers from long Japanese equities and short yen trades. Returns were up in four out of five months this year, compounding a total return of 9.6 percent till the end of May. The fund gained a 2 percent return in May by hedging its exposure in Japanese equities with put options on the NIKKEI 225 (INDEXNIKKEI:NI225) index. Last month, Woodbine Capital incurred the largest losses in its fixed income strategies as bondholders were punished by Fed’s unwelcome comments, while making biggest gains in forex strategy.
The fund’s latest letter does not comment on its long Mexican peso positions, MXN declined 5.5 percent against USD last month. Woodbine has been bullish on MXN based on the thesis that Mexican government will make structural reforms that will benefit growth.
Woodbine Capital Unshaken In Its Stance
Towards the later part of May and continuing in this month as well, Japan experienced bouts of volatility which put the success of Japan’s aggressive fiscal stimulus and the many long Nikkei and short JPY positions in uncertainty. Woodbine, being a hedge fund with significant exposure in the region, seems unshaken in its stance. The fund thinks that this volatility and selloff will fizzle out as BoJ applies a policy that will stabilize bond yields and will reduce volatility.
The hedge fund also thinks that USD will strengthen in the coming months and that will give an additional edge to Woodbine’s short yen positions. However Woodbine reduced exposure in Japan in May and it expects to keep it so till investors put greater confidence in Shinzo Abe’s fiscal plan after the crucial July Senate election.
Woodbine Capital Short GBP, Long FTSE
Woodbine increased its short British pound holding last month and has also established long positions in FTSE and UK’s interest rates. The fund thinks that there is little indication that the new BoE governor will tighten the fiscal policy, it is more likely that it will inject more stimulus. Woodbine also thinks that bearish winds in UK, centering on the likelihood of Fed’s Taper will cool down and equity markets will rise going forward.