Strong performance from 36 South
Monday 20th October 2008
Away from the noise, away from the herd*
strong performance from 36 South.
New Zealand-based investment manager, 36 South Investment Managers Limited (36 South) took their flagship Kohinoor strategy to another year-to-date performance high in September. The Kohinoor Series Two Fund closed September 2008 +9% month-to-date, +28% year-to-date - and +34% year-on-year. Current estimates put October 2008 performance up another 10% as at October 10th. The Kohinoor strategy is currently annualizing at greater than 18% over an almost seven year track record.
The impressive 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. But another characteristic of the investment process is less obvious.
36 South is based in New Zealand, in a purpose-built facility overlooking the beautiful Okura inlet, north of Auckland. The pristine location is indeed a great work environment says Jerry, but more importantly, the relative isolation has significant benefits as an investment manager.
Jerry says much of the recent mediocre investment performance by investment managers and hedge funds 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 funds 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 could not afford them - and creating a potentially huge balance sheet problem. This subsequently manifested as an almost complete collapse of that institution in recent weeks.
*Away from the noise and away from the herd we can be much more effective,* concluded Jerry Haworth.