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Soon Hock Chua B. G., Opalesque Geneva: Veteran investor Soon Hock Chua founded Asia Genesis Asset Management Pte Ltd in Singapore in 1999 and ran the Japan Macro Fund (JMF), an Asia-focused global macro hedge fund which returned 18.7% net annually with low downside volatility from 2000 till 2009. He then closed the US$800m fund and took an extended break, managing his own money.
He relaunched the business in 2020 and started an Asia-focused tactical all-weather global macro hedge fund which now manages about US$173m.
He re-entered a financial place on the rise; Singapore has recently overtaken Hong Kong to become Asia's top financial centre and the third in the world in the Global Financial Centres Index.
With the relaunch, Chua hoped to provide a platform for aspiring Singaporean traders and to contribute to the Singapore hedge fund scene. "Many of my relatives and friends were adversely affected by risky financial products in a leveraged, near zero-rate environment," Chua told Opalesque. "I want to offer a transparent, safer alternative with lower downside volatility and steady returns. I will be using money earned positively to contribute to the poor, sick and distressed."
The new fund, born in the midst of a world in crisis, has so far delivered as promised. It returned 15.3% in 2022 and since its inception in May 2020, has made a cumulative gain of 23.2%, annualising 8.4%.
The Cayman-domiciled Asia Genesis Macro Fund actively trades in the most liquid exchange-traded products such as futures and options of major stock indices, interest rates and foreign exchange. There are no credit derivatives, swaps, individual equities, illiquid instruments, borrowings, or financing arrangements.
Strategy: tactical trading with nimbleness and flexibility
The Asia Genesis Macro Fund trades actively and tactically, keeping exposure to the shortest time possible to reduce time risk. Emphasis is on nimbleness and flexibility.
"Prudent position sizing, strict risk management and nimble tactical trades are key to maximizing trade productivity in any trade ideas engaged," says Chua. "Different products have different characteristics which change according to the landscape. We study our products in detail and adjust trading tactics to suit each individual product. We pay attention to a combination of factors including fundamentals, technical, and market psychology and consistently apply good risk/reward and money management principles."
The liquidity of the fund's instruments and active tactical trading with well-controlled risk parameters enable the manager to remain disciplined and sensitive to risk while identifying good risk/reward opportunities. This way, the Fund can navigate through all kinds of market terrains; bull, bear, range, high volatility and low volatility.
While many traders find the ideal risk-reward ratio for their trades to be approximately 3:1, Asia Genesis looks at the risk-reward ratio differently. Indeed, their risk-reward ratio can be 1:1, as they seek to achieve a higher probability of winning for each trade by identifying good risk-reward trades.
Short-side trading through 2022
Through 2022, Asia Genesis Macro Fund's US equities portfolio traded mostly from the short side, going occasionally long on extended down moves. The fund's US equities trading contributed +13% to the performance, the most among the products the manager traded.
While US Treasury long bond futures prices fell -22%, the manager traded them mainly from the short side in the first half of the year but turned tactically long in the third quarter as the high-interest rate being priced in will inevitably cause a considerable slowdown in the economy and respite in inflation. This portfolio made gains of +2%.
While the Nikkei ended the year down -9.4%, the manager traded the index from the short side and made +4.4% in profits. The short JGB positions suffered losses of -1.6% as BOJ held its QE policy.
It was a challenging first quarter for the fund's long Hong Kong equities portfolio, as the Hang Seng Index plunged -20% within two weeks in March due to war in Ukraine, US sanctions and threats compounding China's own crackdown on the tech sector. Hong Kong stocks subsequently rebounded and ended the year down -15%. Despite trading from the long side, the Hong Kong portfolio only lost -1.9%.
The Fund's FX portfolio contributed +2% in profits, mainly from a strategic long Sing dollar against the US dollar and short Yen against the US dollar.
Performance attribution in 2022
* indicates negative performance
Going into 2023
In 2022, there were both a global bear stock market and a bear bond market from January till late October, and from November generally, both markets were in a range phase.
"Going into 2023, we are likely to witness shorter bull markets with more frequent bear markets and phases, with their attendant implications," says a monthly report seen by Opalesque. "A good understanding of market psychology and proven skills in managing through inflexion points in highly uncertain times with frequent flip-flops between bull and bear phases will be critical. This kind of scenario is likely to be more difficult than an outright 2023 bear market for many funds."
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