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North EM Fund: Long Russian, Short Ukraine Credit

Emerging markets hedge funds have done poorly this year, with one exception being North Asset Management‘s Emerging Market Fund. According to a monthly investor letter reviewed by ValueWalk, the fund had a tough April with -1.27% return, but it still managed a +10.5% gain for the year. A big chunk of the fund’s performance came in January when the return was up 6.6%. The fund also has an interesting new bet related to Ukraine and Russia.

North EM Fund: Long Russian, Short Ukraine Credit

Most emerging markets funds had a tough run

According to returns from HSBC Hedge Weekly, Adelphi Emerging Europe Fund has suffered a 8.9% loss for the year through April 17. Armajaro Emerging Markets Fund is sitting on a 5.7% loss for the same period. Contrarian Emerging Markets Fund was able to gain 2% in the first quarter of this year whereas Bluecrest Emerging Market managed a 0.76% gain in the same period. A few EM focused funds have done well, Finisterre Sovereign Debt Fund was up 6.3% in Q1 whereas Pharo Macro was up 6% through April 11.

Long Russian credit against Ukraine

In April, the fund’s positions were affected due to events in Ukraine. Other emerging markets also showed patchy performance but North Asset Management is looking at signs of stability in some of these economies. The letter said that one cause of concern for emerging markets would be stronger growth data from the U.S which could contribute to normalized interest rates in U.S. The fund opened a long position in Russian credit and local rates which was hedged against a short in Ukrainian credit. After Indian elections, the fund closed out its currency longs in India.

At the end of the month, North Emerging Markets Fund was long Brazilian real versus U.S dollar through options. The fund is also long Mexican market against Pemex, a Mexican state owned petroleum company. The hedge fund expressed its intention of opening new shorts in emerging markets where valuations are rich.