Global hedge fund major Winton suffered significant losses in its China-focused strategy after an unexpected stimulus package from Beijing last month led to a sharp rally in local stock and commodity markets, according to a report by Reuters.
The report cites two unnamed investors familiar with the matter and a recent performance report as revealing that the London-based firm’s onshore China strategy, which trades futures across various assets like stocks, bonds, and metals, has dropped over 8% in value since 20 September, erasing all gains made this year.
Winton, known for its data-driven and trend-following investment approach, was reportedly bearish on Chinese equities and industrial metals while maintaining a bullish stance on bonds as of August. However, the fund was blindsided by Beijing’s unexpected announcement of a sweeping stimulus package on 24 September, which drove up stocks and metal prices while causing a steep decline in treasury bond prices.
As of the latest update shared with an investor, the net asset value of one of Winton’s China products stood at 2.443 yuan per unit, down 8% from 2.667 yuan on 20 September, just before the stimulus-fuelled rally in the Chinese stock market. Year-to-date, the product has lost 0.2%, and over the past three years, it has fallen 3.4% in value. This compares to the strategy’s biggest drawdown of 11.28% over the past five years.
Winton, which declined to comment, was founded by David Harding in 1997 and began trading onshore China futures in 2010. The firm manages between RMB2bn and RMB5bn ($284m to $709m) through its Chinese unit, according to official data, and holds over $12bn in assets globally.
The fund currently trades more than 55 futures instruments in China, linked to a diverse array of assets including stocks, bonds, metals, and agricultural products, as detailed in a company brochure.
An internal report from August showed Winton had taken long positions in precious metals and bond futures, while shorting stock index futures and industrial and agricultural products. Since 20 September, the CSI 300 Index—a benchmark of China’s top blue-chip stocks—has surged over 30%, while an index tracking metals in China has gained 7.4%. Meanwhile, the price of China’s 30-year treasury bond futures has plunged by up to 7%.