Hugh Hendry’s bad luck in his Eclectica hedge fund stuck with him in April as well. The Eclectica Absolute Macro Fund finished last month with a loss of 1.7%, bringing down the YTD return to -9.6%, according to a letter to investors reviewed by ValueWalk. On the bright side, April’s return were better than the fund’s performance in March. Additionally, according to the hedge fund’s website, Eclectica has gained 0.8% in May so far.
Losses as Nikkei closed down 3.5% in April
Hugh Hendry, who just last year shunned his bearish outlook and chose to go with the crowd, has not had a great experience so far. The currency deterioration in emerging markets and the brutal beating of momentum stocks has taken a toll on Eclectica’s portfolio. In the monthly performance update, the fund blamed its losses on the strong reversal seen in Asian internet and robotics stocks. In Asia, Eclectica suffered in its bets on the Japanese market as well. The Nikkei 225 closed another month with a negative return which hurt the fund’s call options in the index. Calls in Nikkei account for the largest holdings of the fund. The fund also took a loss due to its longs in property and brokers in Japan.
Further demonstrating the new bullish outlook, long equity and equity options together make nearly 90% of the fund’s assets in terms of value at risk, whereas short equity portfolio accounts for only 4.4%. Equities caused to a loss of 1700 basis points, according to the letter.
Hugh Hendry profits in long Korean won
In forex, Eclectica has longs in Korean won and Polish zloty against short USD. The long in KRW is one of the few themes that has returned profitably for the fund. Eclectica also holds shorts in South African rand, Chilean peso and Malaysian ringgit versus longs in USD.
Hugh Hendry has bet on healthcare and pharma stocks in the European region. The letter said that the fund is seeking to invest in undervalued biotech businesses “that are hidden within some ofthese large-cap pharma names”, which have potential to capture market share as they grow larger and offer a discount to their counterparts in the U.S. Additionally, Hugh Hendry likes unspecified “Asia-focused internet stocks and robotics companies”.