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Russian hedge funds. The performance for the sixth months 2015

27 November 2015

SPEARs published a ranking of Russian hedge funds for 2014 in June 2015. The ranking includes 26 hedge funds. Our hedge fund EAM Stocks&Derivatives Strategies S.P. became the 8th in the ranking. In my report, I have made a brief summary for the first seventh hedge funds from public data and discussed the performance for the sixth months 2015.

Top spot. The GRW Fund SPC has been working since January, 2014. It uses a strategy for derivatives in the Russian stock market. The subscription amount is $100 000. The management fee is 2% and the performance fee is 20% to the hurdle rate 5%. The performance fee will take place only when the GRW Funds performance is more than 5%. The website gives the necessary information to the  qualified investors for the investments. The last half-year was unsuccessful for GRW Fund SPC. The hedge fund got a drawdown of 57.1% in February, March and April. The summarized result for the last 6 months was 23.01%. I suppose, that the fund produces  high-level performance, which is why one takes the high-level risk.

Second place. Kvadrat Black Fund SP hedge fund developed in August 2013. According to information from Bloomberg website, it uses a strategy for stocks, futures and options in Russian and Amerian stock markets. I wrote about this hedge fund in the article Hedge Funds for Russians. October - December, 2014. The hedge fund demonstrates stability of its performance in 2015 the same as in 2014 without  deep drawdowns. The maximum drawdown was 5.66% in the period from December, 2013 to January, 2015. The hedge fund has the best result of the coefficient Sharp in the SPEARs rating.

Third place. Quantum Brains Capital SP hedge fund doesnt  give any information in the open sources.

Fourth place. Vega Absolute hedge fund has been working since April, 2014. The fund was launched by an ex-employee  of the large Russian investment company Otkritie Capital. There is a full story about the creation and the development of the fund in the FORBESs article : . I didnt find the website of the hedge fund, but I found the information on Bloomberg.  The hedge fund uses market neutral strategies in the Russian market. It has earned 1.73% for the last 6 months, 2015. The maximum drawdown was -2.26% from August to October, 2014.

Fifth place. Inventum Market Neutral Return   hedge fund was created in  January, 2014. Investment portfolio includes the stocks from the list of the index S&P500 and the futures on the index for hedging. The fund has a modern web-site and realizes in the HedgeCo agency. I suppose, the  team makes marketing of the hedge fund for foreigner customers only, because there is no information in the Russian language. The fund has -5.41% performance for the last 5 months. This is its maximum drawdown.

Sixth place.  Copperstone Alfa Fund hedge fund has been working since January, 2012. This hedge fund is often included in the SPEARs ranking. I wrote in detail about it in my article Hedge-funds for Russians. Now the Copperstone Alfa Fund hedge fund is the leader which earned 12.57% in 2015. Its maximum drawdown was -23.27%.

Seventh place.  VR Global Offshore hedge fund is the biggest hedge fund in the SPEARs ranking. It manages more than 1 billion dollars in the investment portfolio and uses strategy in fixed income.  The VR Global Offshore hedge fund doesnt give any information in open sources and it doesnt have a website.

Eighth place. Our hedge fund took 8th place in 2014. The first half-year of 2015 was unsuccessful for us. At first, the bonds dropped sharply and then the volatility increased from the crisis in the Greece. Our hedge fund lost 4.8% in June and -6.90% in the first six months of 2015. However, we are sure in our strategies. Now, I want to tell you more about our strategies and why we are so sure in them.

Our trading breaks down into three complementary strategies:

1.  Long option call has to earn a lot of money in the rising market. This strategy gives a controlled loss in the flat and in the declining market.

2.  Long Treasuries TLT (20+ Treasury ETF) stabilizes exposure to market which arose in the first strategy and makes up the risks of the bearish market.

3. An accumulation of put option prices should make a profit in the all slow market movements.

The first and the second strategies together simulate a standard investment portfolio 60/40 (60% stocks and 40% bonds), which presents a classical way of creation of a stable long-term investment portfolio. The negative correlation between stocks and treasuries doesnt exactly equal -1. Sometimes, such an investment portfolio has drawdown. We observed a similar case in 2013 and now in 2015.

Since January, 2015 ETF TLT has dropped to 14%.

TLT

The stock market, which has developed since January 2015, has not risen to make up for decreasing in the bond market.

S&P500

We assume that the bond market is oversold relative to the stock market; therefore we continue to keep the current correlation of our strategies.  Now our strategies experience the bad market scenario. Only one strategy is making profit and paying the losses from other strategies. We do not see an outstanding issue, because:

        We dont have big losses in the bad market for our strategies;

        The bad market scenario will end sooner or later and after that the good market opportunities will begin for us.

Guessing about the market

Currently, many forecasts published that the USAs market was overbought. It has to drop heavily soon.  We made statistical analyses and summed them up in the article ? Given our analysis, we theorize that the USAs market doesnt have a bubble that can lead the market to drop considerably, like how it did in 2000, 2004 and 2007-2008. Of course, everybody wants to know: What will be the market in the future? We guessed on the future of the market and concluded that beginning in 2015 a situation arose that will lead to the correction of the stock market. The correction will temporarily begin when the market calms to a flat trend. Then the market will start a sluggish down trend that may end with a slump in prices at a closer date. This point will show the start for a new upward trend in the market. We estimate that this current correction will take place until the middle of 2016 and upward trend will begin afterwards.

Denis Eganov & Alexander Kurguzkin

info@eampartners.com

July 23, 2015

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