Matrix Asia Fund’s long-short strategy delivers 53 per cent outperformance

Since its launch on 8 August 2008, the Matrix Asia Fund has outperformed the MSCI Asia Pacific Index by 53 per cent, returning 39.6 per cent by using a long-short strategy that focuses on

Since its launch on 8 August 2008, the Matrix Asia Fund has outperformed the MSCI Asia Pacific Index by 53 per cent, returning 39.6 per cent by using a long-short strategy that focuses on the relative winners and losers of the Asian growth story.
 
The Matrix Asia Fund typically holds 30 to 40 stocks between its long and short books, enabling its manager, Rupert Foster (pictured), to implement his views aggressively.
 
Foster expects Asian markets to hit new highs in the next two to three years and then to surge further even as Western consumption and demand disappoint expectations.
 
Most of the fund’s returns to date were driven by playing the theme of growing Chinese domestic consumption, with about half coming from its holdings in consumer discretionary, while IT and industrials account for about a fifth each. The financial sector is also important to Foster but he has to date largely avoided the utilities, telecoms, materials and healthcare sectors.
 
Foster believes the Asian growth story is highly suited to a long-short strategy as developing markets such as China, India and Indonesia put increasing pressure on the mature markets of Japan, Taiwan and South Korea.
 
He is watching closely the gradual climb up the value chain by Chinese manufacturers, putting further strain on the region’s developed markets, whose manufacturing industries are already struggling to compete. 
 
Foster says: ‘Most the of the genuinely interesting (long) markets in Asia are still emerging markets – China, India, Indonesia – and emerging markets have very volatile performance. As a long-short fund, the Matrix Asia Fund seeks to make money in strong bull market corrections or bear markets – like we saw in 2008.
 
‘I will be exploiting the investment opportunities that arise as the region’s developed markets derive some benefit but also come under pressure from the growth markets of China, India and Indonesia.
 
‘The economies of Japan, Taiwan and Korea are dominated by manufacturing industry, and lower-tech industries such as steel, shipbuilding, chemicals and electronic equipment manufacturing already face pressure from developing Asia, and China in particular.
 
‘The higher tech industries have to date been well protected by technology but China is aggressively attempting to move up the value chain leading to the strong likelihood of significant pressure on developed Asian economies. Asian investment is very much a long and short game – there are undoubtedly strong underlying bullish trends but there will be lots of losers too.
 
‘In the last quarter of this year economies will resume strong growth and although conditions will be drab in the interim, this gives us a chance get into the right names for the next big bull phase – in domestic consumption in China, infrastructure in India, selected commodities on the long book and selected areas in Japan and South Korea on the short book."