Horseman Global, which was up until recently the world’s most bearish hedge fund, before it suddenly reversed course and capitulated on bearish bets earlier in January has made terrible start to 2017. The Horseman Global fund is down 7.7% year-to-date after losing 1.1% in March thanks to a poor performance from the bond book and long book. Ironically, for the period the short book (or what remains of it) chalked up the best performance. US retail, REITS and auto shorts all performed well.

On a net basis, the whole equity book was flat. Excluding equities, all of the portfolio’s losses came from bonds and as a result, Russell Clark, chief investment manager of the Horseman Global fund, writes in the fund’s March update that all long dated bunds have now been disposed of. Short dated bunds remain on the book.

 

Horseman Global: From short to long

Horseman Global: Who Will Buy When Passive Falls Out Of Favor?

In the manager’s commentary section of Horseman’s March fund update, Russell Clark discusses how the rise of passive investing has benefited the Horseman fund. However, rather than focusing on the traditional argument that passive investing is good news for active investors because it throws up more opportunities, Russell concentrates on the positive impact ETFs are having on short selling. Specifically, he writes:

I am not a particularly big fan of the idea that markets are efficient. In fact I think people who believe this have never spent any time working in investment management. Everyone in the industry has seen how investment fads wash over the industry from time to time, only to wash out again as returns begin to disappoint. Making money is hard, and most investment managers, either overtly or discretely will seek to have momentum in their strategy. I would say that almost all investors have realised that this is a big part of hedge fund strategies, and have increasingly looked to cut the middle man out on this. For me this has been a big part of the rise in ETF and other passive funds. The rise of the ETF has certainly put pressure on the active fund management sector to cut its fees. There are complaints from some quarters about it being harder to short sell as flows of money push up stocks.

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