Attention China Hedge Fund People

This is not a drill.


The news, as you no doubt anticipated, is not good.

Greater China hedge funds plunged an estimated 10 percent in August, putting them on track for their biggest decline since at least January 2000, according to preliminary estimates from Eurekahedge Pte. The Orchid China Master Fund, a $304 million strategy managed by Hong Kong-based Orchid, fell an estimated 7.3 percent, according to a month-end investor update obtained by Bloomberg News. APS’s Greater China Long/Short Fund declined 7.2 percent in the month through Aug. 28 as the firm’s China A Share Fund fell 5.5 percent as of Aug. 21, according to a month-end update….

“Greater China hedge funds are on track to show the worst three month returns in at least a decade,” said Mohammad Hassan, an analyst with Eurekahedge in Singapore. “It’s not a surprise given the funds’ limited ability to short the stock markets in China.”

Their pain is the black-swan farming world’s pleasure, however, as even tail-risk funds notspiritually managed by Nassim Taleb from atop a mountainous Aegean island are enjoying everyone else’s nightmare.

Three of 36 South’s strategies, which bet on rising price swings, gained more than 10 percent in August, based on initial estimates, Chief Investment Officer Jerry Haworth said in an interview. That would be the best monthly return in at least three years for its main fund, according to the manager….

“Between March and July, when volatility was really getting quite low, we were saying: it doesn’t get much better than this,” Haworth said. “Volatility is like a canary in a coal mine. When it’s low it’s almost telling you to buy it.”

China Hedge Funds Face Worst Month in 16 Years After Carnage [Bloomberg]
China Shock Boon for This Hedge Fund That Bets on Volatility [Bloomberg]