New Zealand-based hedge fund manager 36 South Investment Managers Limited took its flagship Kohinoor strategy to another year-to-date performance h
New Zealand-based hedge fund manager 36 South Investment Managers Limited took its flagship Kohinoor strategy to another year-to-date performance high in September, attributing part of its performance to the investment management team’s relatively isolated location in New Zealand.
The Kohinoor Series Two Fund closed September 2008 +9 per cent, +28 per cent year-to-date and +34 per cent year-on-year. Current estimates put October performance up another 10 per cent as of October 10. The Kohinoor strategy is currently annualising at greater than 18 per cent over an almost seven-year track record.
The fund’s performance may be attributed to a "well-constructed, robust investment process put together with equal measures of perspiration and inspiration", says Jerry Haworth, Chairman and Chief Investment Officer of 36 South (see Hedgeweek Interview).
But another characteristic of the investment process is less obvious. 36 South is based in New Zealand, in a purpose-built facility overlooking the Okura inlet, north of Auckland. The location is indeed a great work environment, says Haworth, noting that the relative isolation has significant benefits for an investment manager.
He says: "Much of the recent mediocre investment performance by investment managers may be attributed to ‘crowding’ within both trades and investment strategies. It is 36 South’s very isolation that has enabled the firm to isolate extreme value opportunities, often where crowding may be present, and convert those opportunities into profits for the fund’s investors."
Examples of some 36 South trades from the past three years: buying Nikkei 225 call options in July 2005, to sell those same call options in December 2005 after the last big Japan equity rally; buying call options on oil in September 2006, and selling into a ‘one-way’ bull market in May 2008. And again, in 2006, buying put options on a well-known US lender that was clearly selling inappropriate home-lending products to people that couldn’t afford them – and creating a potentially huge balance sheet problem. This subsequently manifested as an almost complete collapse of that institution in recent weeks.
Growing up in both Zimbabwe and South Africa, Haworth is fond of wildlife analogies to illustrate market realities. "Away from the noise, away from the herd, one may be more predator than hunted," he says.
