Q1-2022 Swiss-Asia Communication

Q1-2022 Swiss-Asia Communication

HEDGE FUND INDUSTRY UPDATE?

As the first quarter of 2022 has been generally ominous for global markets as well as a bumpy start for many funds.?We would like to provide some backdrop and reviews for the different asset classes with examples of the Swiss-Asia Fund Platform Funds. Generally, concerns over the economic implications of the Russian invasion of Ukraine and the potential need for a faster pace of interest rate hikes to combat decade-high inflation weighed on both equities and bonds. The road ahead will most certainly be very interesting.

On the Global Macro front, The Financial Times reported that Tiger Global’s flagship hedge fund was dealt a fresh blow in April and is down more than 40 percent in Q1 2022.?This is the latest sign of how star investors who rode the big rally have been wrongfooted by a sharp pullback and unstable global macros and geopolitical events.

According to Opalesque the Hedge Fund industry still remains comfortably above the 4 trillion mark. It was also reported that Trend-Following CTA strategies posted record gains. Total capital inflows in this strategy class reached $19.8 billion in Q1 2022, the highest quarterly inflow since Q2 2015.?This can be confirmed by us as TGCC M3 Momentum Fund showed solid gains and asset inflows.

From diverse reports, we understand that Investors removed an estimated net $8.96 billion from hedge funds in March. It is difficult for anything to grow when some of its largest pieces are not growing and that is why the hedge fund industry ended Q1 with essentially zero growth from net investor flows. Long/short equity and credit strategies are having a very difficult time raising new capital to outpace redemptions and recent performance in an albeit very difficult environment does not appear to be inspiring investors.

In short, the industry ended Q1 2022 in pieces. Some pieces are performing well and generating solid investor interest while some pieces are not. Given that Q1 net flows have historically given a good indication of what to expect for the full year, we should temper our overall expectations for broad industry growth in 2022.

?FUND PLATFORM UPDATE

The Top-10 Swiss-Asia platform Funds actually managed to maintain acceptable levels of performance albeit with a little more volatility than we expect of them.??

TGCC M3 Momentum Fund - Q1: +14.8% - TGCC M3 Momentum Fund finished its Q1 at new all-time highs with solid gains in all three months despite turbulence in equities and fixed-income markets. Commodities including oil, natural gas, and agriculture contributed the most gains thanks to the lasting war between Russia and Ukraine. The war and economic sanctions on Russia fundamentally support the price of energy and food. In the meantime, decade-high inflation in US and Europe is driving investors for inflation protections, which lifted the price of commodities further.

AMB Megatrend - Q1: +7.41% - Megatrend delivered solid gains in the first quarter, maintaining its momentum since last year. The fund was up more than 8% in February as the Gold price jumped from $1,800 to $1,950 after the outbreak of Russian-Ukraine war. While in March, the majority of gains came from WTI as energy prices reached new highs since 2008. Moreover, the fund’s long US dollar positions benefit from the Fed’s announcement of a 25 bps rate hike.

Coprossa, Q1: -18.72% - The long-short Japanese Equity fund lost about 18% in the first quarter, which is the fund’s largest drawdown since inception. The portfolio suffered the most in the first two months as the long book lost significantly due to downward pressure from global interest rate hikes as well as geopolitical tensions between Russia and Ukraine. The fund recovered in March along with the broad Japanese equities. The manager will pay special attention to the impact of quantitative tightening in the US and plans to increase short positions driven by bottom-up research.

Prulev, Q1: -48.0% /?Vanda, Q1: -31.68% - Global Macro funds had a terrible start in 2022 with consecutive losing streaks for 3 months. The strategy mainly suffered from huge losses in the fixed-income asset class, led by increasing interest rates globally as central banks pledged to act against decades’ high inflation. As the market continues to price in as much as 200 bps rate hikes by Fed within this year, the manager of Vanda has decided to reduce exposure to interest rates and stays cautious on equities and commodities.

Seres, Q1: -18.50% / Morning Trail, Q1: -27.13% - China-focused funds lost substantially in the first quarter as Chinese equities underperformed most markets during the period. The main concern was related to a new outbreak of Omicron and the subsequent lockdowns in Shenzhen, Shanghai, and other cities. Manufacturing plant shutdowns exacerbated global supply constraints in some crucial sectors. The Hang Seng Index lost about 30% in a single month, which indicates the market’s pessimistic outlook on the economic growth for this year.

CRYPTO UPDATE

The crypto space continues to show a very high correlation to broader risk assets and more specifically to the Nasdaq. While BTC and ETH contained losses of around 15% to 20% other tokens were down sharply in the 25% to 40% range in April. Most of that capitulation and decoupling happened over the last few hours of the month on Saturday, April 30th. As an indicator, the Bloomberg Galaxy Crypto index is down 29% for April. Despite the bear market and the macro uncertainties in the current environment, the venture funds have never been that active with $14.6 billion invested into crypto since the beginning of the year. The environment for trading strategies and active arbitrage has remained poor and there have been no significant signs of improvement with volumes reaching 12 months lows across top instruments.?Source: Kernel Fund April Update

Q1-2022 NEW FUND LAUNCHES

Quilvest South Pacific Fund (Q1: -14.31%) joined Swiss-Asia in February this year with a long-only equity strategy focused on China and Southeast Asian markets. Similar to the China-focused funds, Quilvest suffered from the sell-off in Chinese equities in the first quarter. While there may be bumps along the way, the manager believes the long-term theme remains intact, that China will outgrow all other economies.?David Linker, is the Portfolio Manager of Quilvest and the Arrowhead New Energy Fund.?David has 15 years experience in equity investments. Please refer to the Q3-Q4 2021 Review for a full bio on David Linker.

HUMAN RESSOURCES ACTIVITY

On the new hires side, we continued to strenthen our core operational teams accross all departments with 5 new hires in Q1-2022. We are dedicated to continously provide a high quality service to all our Managers.

During our recruitment process, we continue to note that most candidates prefer a hybrid working model. We thus need to get to grips with the idea that hybrid work is here to stay. As a result, we must strive to adopt a productivity anywhere workforce model. For both employees and employers, work from anywhere is about owning results, regardless of where or when work happens.?Today, employees regard freedom to work from anywhere as an important benefit of their job.?This makes defining successful work from anywhere practices critical for employers.?

On behalf of the whole Swiss-Asia team, I would like to thank all our Managers and support teams for their dedication and hard work.

Written by Steve Knabl, COO & Managing Partner