Asia Genesis strategy to help investors weather “bull and bear decade”

Following the stellar performance of his Japan Macro Fund in the early 2000s, Soon Hock Chua has opened access to his most recent hedge strategy through tokenisation on the ADDX digital securities platform.

Singapore-headquartered digital private market exchange, ADDX, has opened up access to Asia Genesis Macro Fund (Asia Genesis) via its blockchain-enabled platform.

Driving the strategy is founder and chief investment officer (CIO), Soon Hock Chua (pictured), who is famed for having delivered a compelling performance across the Japan Macro Fund (JMF), a pan-Asian investment vehicle that achieved an annualised net return of 18.7% during the 10 years through to 2009.

The Asia-focussed, “all-weather” open-ended hedge fund first launched in May 2020. Since last week, its entry threshold has been reduced for those investors active on the ADDX exchange, with minimum subscription starting from $20,000.

It aims to serve as a means for capital preservation and positive annual compounding, through its provision of “uncorrelated returns with low downside volatility across bull, bear and range markets,” the announcement detailed.

“We target net returns of 12% to 20% per annum,” Chua told FinanceAsia.

Between 60% and 70% of the active fund’s trading is in the stock indices of Japan, Hong Kong, China, India, and the US. The remaining exposures are in interest rates and major currencies.

“Exposure is now evenly split across Asia and the US (50:50), but is expected to tilt towards more Asian products as they develop further,” Chua explained.

“The fund trades only liquid exchange-traded products across stock indices, interest rates and foreign exchange such as Nikkei, Hang Seng, the Hang Seng China Enterprises Index (HSCEI), Nifty, S&P, Nasdaq, US Treasury Bonds (T-bonds), Japanese Government Bonds (JGB) and major currencies.”

Risk versus reward

The flagship fund relies on the expertise of a team of 16, including five investment professionals and 11 staff who work across compliance, risk, operations and investor relations. It targets a global investor base with a focus on the institutional community, though Chua hopes to expand its footprint to include high net worth investors (HNWI) and family offices.

Elaborating on the team’s investment strategy, Chua shared, “We pay attention to a combination of factors including fundamentals, technical, market psychology and consistently look for good risk-reward opportunities.”

“At the macro level, we identify a general direction to trade at the start of each year to ensure big picture risks are not against us.  For example, with increasing uncertainties associated with inflation, we prefer to trade US T-Bond generally from the short side – especially with a steep inverse yield curve.”

He explained to FA that while many traders look to ideal risk-reward ratios of 1:3, the Asia Genesis team looks for a high probability of winning each trade, 1:1.

“We don’t believe in betting for home runs. If we are wrong on our view, we try to lose little or even make a little; if we are right, we make a little more.”

By the end of December 2022, Asia Genesis had returned 23.2% cumulative and 8.4% annualised since inception.

But Chua emphasised how the current environment requires a very active investment approach.

“In 2021 we were wrong on our macro view. We expected the US Federal Reserve to hike rates, but it did not. We traded from the short side, and so the fund only returned 3.2% net, in 2021.”

“Many fundamentals have changed.”

Current trade conviction

Chua offered his thoughts on the forthcoming trade performance landscape.

Contrary to current market expectation, when it comes to the outlook for dollar-yen activity, Chua anticipates a weaker yen – something he does not consider to be adverse for the Japanese market.
“The Bank of Japan (BOJ) has very limited flexibility. Between a debt crisis in JGB or a weaker yen, the obvious choice is the latter.”

“Higher rates in Japan will trigger a debt crisis because of the 250% government debt ratio over GDP, as debt financing costs are already at about 50% of the annual budget. This is with nearly 27 years of a zero-interest rate policy. If JGB rates were to go to 1% or 2%, the adverse consequences would be unimaginable.”

“You can’t have a perfect combination of low interest rates of near zero and a strong yen for too long. The current situation is as good as it can be.”

More broadly, in terms of post-pandemic stock market performance, Chua thinks that any rebound will be short-lived, “This cannot be sustained and will reverse somewhat soon.”

“We are into a frequent bull and bear decade, with stickier inflation, trade and tech sanctions, greater resource utilisation and consumption by emerging economies. The days of cheap resources are over.”

At the end of 2022, Asia Genesis had $173 million in assets under management (AUM), including $40 million in personal wealth contributed by Chua and his family. Chua aims to grow the fund’s AUM to $500 million, by the end of 2023.

CEO of ADDX, Oi-Yee Choo said in the release, “Amid a broader reallocation towards alternatives by both institutions and mass affluent investors, technology is likely to be an important driver of growth for the hedge fund asset class in the coming years because it reduces the barriers to entry for investors.”

“Not surprisingly, investors who were pleased with their JMF returns are now excited that he has returned to trading and fund management, with a strategy similar to that of JMF.”

“ADDX is the only digital exchange giving investors access to Asia Genesis, and we are doing so at a fraction of the usual minimum ticket size of US$1 million.”

Read also: Temasek-backed venture debt fund tokenises on ADDX 

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