Hugh Hendry (the one time bear) who turned bullish, had some poor timing (at least, in the very short time frame since the switch). Below is the latest commentary from a letter which Hugh Hendry sent to shareholders of Eclectica Asset Management.
- January witnessed renewed turmoil in emerging market equities and currencies. The Fund profited from positions within our Short Emerging Markets and Short China themes (+0.9%).
- FX positions within these themes generated a positive return of +0.3% as our “good versus bad EM” FX basket posted gains, largely driven by shorts against the Turkish lira and the Russian ruble. Equities provided an additional +1.4%, led by short exposure to Chinese and EM indices. These gains were partially offset by losses on curve steepeners in Australia and Korea, which were closed out during the month.
- Developed market equities suffered sharp sell-offs over the course of the month as emerging market woes spilled over into global risk assets. The Fund’s core Long Developed Markets theme suffered as a result (-2.0%). Developed market equities cost the fund -1.7%, led by weakness in internet and robotic stocks. Additional call option exposure to US and European indices cost a further -1.3%. Equity losses were partially offset by gains in front-end rates in the Euribor and Short Sterling curves, generating a positive contribution of +0.8%.
- The largest detractor to performance came from our Long Japan theme (-3.0%). Losses on Nikkei call options were the single biggest drag on performance during January (-2.2%), as the underlying index fell -8.5%. Cash equity positions in Japanese brokers and property shares cost a further -0.8%.