As some of you would probably have heard by now.
This week saw the closure of quite a storied Singapore Hedge Fund.
Asia Genesis Macro Fund, with Chua Soon Hock as CIO.
What went wrong for Asia Genesis Macro Fund? Long China, Short Japan?
I extracted the full letter to investors below for your reference.
But the long and short is that the fund was long China and short Japan heading in 2024.
And exactly the opposite played out in 2024 – with a monster rally for Japan, and a monster drop for China.
The fund saw a 18.8% drop in January alone.
With an AUM of about $330 million, that was close to a $62 million loss in January alone.
CIO Chua said he was “astounded by the incredible Nikkei-Hang Seng spread that priced Chinese versus Japanese stocks at the same value as in 1991, despite current economic realities.”.
Chart below – you can see how the Nikkei-Hang Seng spread is at levels last hit in 1991, which gives you an idea of how bearish investors are on China (and bullish Japan by comparison).
Asia Genesis Macro Fund is quite a storied name
Asia Genesis Macro Fund is actually quite a storied name.
CIO Chua previously ran a Japan macro fund which returned 18.7% annually from 2000 through 2009.
Asia Genesis Macro Fund itself generated a 7.9% annualized gain between its May 2020 inception and the end of 2023, without a losing year.
Full letter from CIO Chua Soon Hock to his investors is set out below.
And I mean this with absolutely no trace of schadenfreude at all.
But a timely reminder that no matter how good each of us may be, the markets exist to humble us all.
For all of us trying to “beat” the markets – we should never forget this lesson.
“Dear Investor,
I am writing to you with a heavy heart and utmost regret. Asia Genesis Macro Fund has had a significant and unprecedented drawdown of -18.8% in the first weeks of January. As such, I am making the painful decision to close the fund and return your investments. This decision has been seriously thought through and considered with my colleagues and is the logical prudent way forward before incurring further losses. A detailed explanation of the drawdown, actions taken to manage the Fund’s risk and contain losses for investors can be found on the next page.
I have reached the stage whereby my confidence as a trader is lost. The recent tough trading – October, November, December 2023 followed by a disastrous January 2024-has proven that my past experience is no longer valid and instead, is working against me. I have lost my knowledge, trading and psychological edge. The principle of risk-reward for both the short-term and long-term has turned its head. We made big mistakes in the recent sharp Nikkei and Hong Kong moves which went in opposite directions. I underestimated the Nikkei’s straight-line upward movement and Nikkei ETFs being bought at a 20% premium over net value on China exchanges, and how long this will continue.
I still do not understand the inconsistency of China policy makers not fighting against deflation, leading to the continued loss of market confidence and prolonged bear market. We made another big mistake in trying to pick the bottom in the Hang Seng and Hang Seng Tech indices. I am astounded by the incredible Nikkei-Hang Seng spread that priced Chinese versus Japanese stocks at the same value as in 1991, despite current economic realities.
In the days and weeks ahead, we will follow up with each and every one of you regarding redemptions from the Fund. Our fund administrator CITCO will calculate the Fund’s Net Asset Values and my team will work closely with them to process the return of your investment at the earliest possible time. Meanwhile, we remain at your disposal to answer any queries or provide further detail.
My sincere deep apologies to all of you who have trusted me with your money.”
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