20th March, 2020

Q1-2020 Swiss-Asia Communication

What a start to 2020 !!! In the month of March, risk assets experienced unprecedented losses in terms of both speed and order of magnitude; nearly bringing the financial system to the brink of seizing up as market participants rushed to raise liquidity. Fortunately, markets reversed relatively quickly and many Fund Managers positioned themselves to finish the quarter in not such a bad position. Governments around the globe announced unprecedented fiscal and monetary stimulus plans to stabilize funding markets, support businesses and provide relief for expected higher unemployment rates.

The world seems to have entered an unprecedented status of work from home with the global economy limping on and invariably entering a recession which we do not know how and when it will play out.

Business as Usual:

Service providers such as Swiss-Asia prove their worth in these times as operations continue to operate seamlessly. As the coronavirus pandemic continues to impact all corners of the globe, orders to ‘stay at home’ are commonplace worldwide. With Fund Managers’ time heavily prioritized toward staying in front of their investors and investments while trying to strategize around potential opportunities, it becomes more important than ever that their service providers are in a strong position to deal with unexpected events, take care of Business As Usual and indeed stand ready to support new fund launches and new clients. Today, more than ever, we can acknowledge that Business Resilience is Key. Scalability, resource flexibility, expertise and operating model efficiency are typically hailed as the main benefits of partnering with Swiss-Asia. Growing global risks in recent years, such as cybersecurity and operational risks, mean managers and regulators have been placing greater focus on the robustness of Business Continuity Plans and operational processes.

SWISS-ASIA PLATFORM FUNDS PERFORMANCE SNAPSHOT

From a performance perspective, I must say that I have been very positively surprised by the Q1 leaderboard. January and February was business as usual with the usual names at the top of the list, but March changed everything in an impressive way!

The Eurekahedge Hedge Fund Index returned -4.37% in March and -5.98% for Q1-2020. The Eurekahedge Crypto-Currency HF Index returned a nasty -18.23% in March and -2.43% for Q1-2020. But many Swiss-Asia funds showed some enormous resilience and substantial over performance to the general hedge Fund indices and Crypto benchmarks.

TGCC M3 Momentum Fund returned a whopping performance in just 3 months. The TGCC Teams model has captured the market momentum accurately. We need to watch TGCC closely in 2020.

Our Crypto Managers, Acuity Capital and Kernel Fund SP demonstrated their Alpha generation capabilities during enormous volatility in the Crypto Markets and Equity Markets. This further emphasises the need for asset class diversification in a portfolio allocation.

AVM and Pearl River SP continue to show strong resilience in these very uncertain markets. You can read a little more about them and their performance in Q1 further down in the report in the new “featured Funds” section.

Fund Jan MTD Feb MTD March MTD* 2020 YTD returns
TGC M3 Momentum 9.7% 24.0% 33.9% 62.7%
Antwern 3.0% 10.1% 7.5% 21.9%
Kairos SP -0.4% -21.5% 53.2% 19.7%
Rare Metals 17.8% -0.3% -2.1% 14.9%
Acuity Capital - 2.1% 12.3% 14.7%
Coprossa Japan Long/Short 2.3% -0.2% 3.6% 5.7%
Kernel Fund SP -2.2% 1.4% 6.0% 5.1%
AVM Global 0.6% 1.3% 3.0% 5.0%
Fund One 1.5% -4.8% 5.8% 2.2%
Pearl River SP 1.0% 0.1% 0.3% 1.4%
*Some figures are estimates

Global Equity (MTD/%) (YTD/2018) (YTD/2019) (YTD/2020)
MSCI ACWI Index -13.73% -11.18% 24.05% -21.74%



Despite a volatile start to 2020, we were very proud when PruLev Global Macro Fund bagged 3 awards at the 2020 AsiaHedge Awards in January 2020 ! Best Macro 1yr, 5yr 250m-500m, Fund of the year >250m ! The year has just begun – let’s see how the Global macros will do over the next 9 months. The year is far from being over.

FUND PLATFORM DEVELOPMENTS

BTCX 100 Fund

The single-asset index fund gives 100% ‘long-only’ exposure to Bitcoin in a safe and transparent manner. BTCX100 provides 100% underlying physical Bitcoin with Insurance Coverage. Weekly contributions & redemptions and all this with only a 2.25% total expense ratio. The Fund boasts a seamless online subscription process that enables investors to not print one single piece of paper.

BTCX100 was conceptualized and sponsored by the Stack team. Stack bridges the old world economy with the emerging digital assets space. Partnering with Swiss-Asia, Stack provides accredited investors and traditional financiers with streamlined, secure, and simple ways to capture the opportunities presented by digital assets via its Investment Funds.

As the first to launch an institutional-grade digital asset index fund in Asia, Stack structures the delivery of its products to the highest degree of security, flexibility and compliance. Its services bring investors ease of mind with fully insured custody and the familiarity of a traditional investment vehicle. For more information, visit www.stackfunds.com

The Portfolio Manager, Matthew Dibb, has 12 years of experience across capital markets, equities and derivatives trading and venture capital. Matthew has held senior positions in banks and investment boutiques in Sydney, Dubai and Singapore. Since 2016, he has been involved with asset management and research for the digital assets market. It is clearly a good time to launch the BTCX100 Fund because Traditional markets have imploded this year as governments orchestrate stimulus packages to ease a financial fallout. Investors are flocking towards safe-haven assets such as gold or Bitcoin, a potential quasi-gold standard, as they seek new forms of decentralized sovereign value that provides uncorrelated benefits. This is where a vehicle like BTCX100 provides exposure to Bitcoin in an entirely safe and seamless way.

Note on the Singapore Variable Capital Company (VCC)

On the industry development side, most of you already know that Singapore has finally Launched it’s VCC on 15th January. To encourage industry adoption of the VCC framework in Singapore, MAS has launched a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCC’s per fund manager. The grant scheme will be funded by the Financial Sector Development Fund (FSDF) will be valid for a period of up to three years.

At Swiss-Asia we are already working on launching our first 2 VCC’s, one for a Private Equity team Latin Leap, and the other an Umbrella Fund for multiple sub-funds for Swiss-Asia to help smaller Fund Manager entrepreneurs launch their strategies at a marginally lower cost basis.

FEATURED FUNDS

As you all know we have not been able to deliver on our promised Capital Introduction Events and Fundies Networking evening for obvious reasons. So, going forward we will feature a section on selected funds and strive to publish a monthly spotlight on our Fund Managers. Don’t hesitate to reach out if you are interested in obtaining more information.

AVM Global Opportunity Fund

Combining fundamental research with a systematic investment approach, AVM delivers uncorrelated returns through the full economic cycle. This highly data-driven strategy targets doubling investors’ capital every 6 to 8 years, with a strong focus on capital preservation and protecting downside risk.

How AVM has performed since inception

  • Total returns of 35% since inception in Nov 2016
  • Annualised volatility of only 5.3% through this turbulent investment backdrop, which is less than a third of global equities
  • High Sharpe Ratio of 1.73, which is ranked in top 1% of funds in its Morningstar Peer Group
  • Low correlation of -8% to S&P 500, which has helped investors with portfolio diversification

Q1 2020 Performance

The fund switched from a pro-cyclical portfolio at the start of the year to a highly defensive strategy at the end of January when it became obvious that Covid-19 was about to cause major disruptions to the global economy. We noticed that investors were still extremely optimistic in February, with positioning in stocks at 10 year highs, which we found alarming. We positioned for a sell off in the S&P 500, and started betting on the Fed to cut interest rates to deal with the slowdown in growth. As the sell off begun, we noticed that it was quickly turning into a deleveraging event, and decided to go long the US dollar as we anticipated investors would sell everything to raise cash. This allowed the fund to generate a strong return of 3% in March, ending Q1 with a return of 5.1%, while at the same time maintaining a low realised volatility of 5.3% during this turbulent period.

Pearl River Fund SP celebrates it’s first anniversary

Pearl River fund has continued on a positive trajectory in 2020 and has delivered an annualised return of over 15.94 % since inception in April 2019 with an extremely low volatility, as compared to 2.39% for MSCI World. Based on provisional numbers available for march, the fund will be up over 1.8% YTD, delivering positive returns in all months in 2020.

The fund offers a unique opportunity in the current scenario as it may benefit from the potential impact of COVID on increased mortality in US, especially in the senior population. On one hand it helps US seniors to monetise there life insurance policies and use them for improved health care and better life style and on the other the investment in such policies offer an attractive investment opportunity for the institutional investors. With the support of the government in US to Seniors and Life Settlement Industry, this asset class is poised to become an attractive alternative investment offering superior risk adjusted returns.

Below are key attributes of the fund which make it one of the most attractive and stable investment opportunities in the current uncertain times.

  1. Pearl River invests in Life Settlements market, which is defined as acquisition and trading in Life Insurance policies issued by US Life Insurance companies.
  2. It has no correlation to equity, debt or other asset classes and thus is not affected by the market volatility or other risks associated with financial markets.
  3. The policies acquired by the fund are Insurance liabilities, ranked above an insurance company’s commitments to equity and bond holders.
  4. It offers a huge social benefit to Senior Population in the US and the recent developments will lead to increased liquidity in this growing market.

https://insurancenewsnet.com/press-releases/congress-re-introduces-bill-to-create-a-tax-free-ltc-life-settlement-benefit-account#.XoHdgogzZyw

All life insurance policies eligible to be acquired under a life settlement transaction cover pandemic and epidemics.

Below is a graph comparing Pearl River with other market indices.

On behalf of the Swiss-Asia team, we sincerely wish you all the best for this difficult and complicated phase in our lives and look forward to deconfinement so that we can get back to our new normal someway or another.

Steve Knabl
Swiss-Asia, COO & Managing Partner