Marko Dimitrijevic’s Everest Capital is deftly maneuvering through the volatile emerging markets so far this year.
According to its May report sent to clients and obtained by Alpha, four of the Miami-based firm’s five global- and emerging-markets-focused hedge funds gained between 4 percent and 5 percent last month alone. As a result, three of the hedge funds and the firm’s two long-only funds are handily beating the various global market benchmarks for the first five months of the year.
Specifically, Everest Capital Global, launched in 1991, rose 4.8 percent in May and is now up 8 percent for the year. Everest Capital Frontier Markets returned 1.7 percent in May and is up 9.8 percent for the year, while Everest Capital Emerging Markets added 4.5 percent last month and is up 14 percent for the first five months of the year. All of the funds combine what the firm describes as top-down and bottom-up fundamental approaches to investing.
Dimitrijevic founded Everest in 1990. Today it’s not only the oldest emerging-markets hedge fund firm, but also one of the oldest hedge fund firms period.
Yet Everest manages just $2.5 billion, which is not huge, considering how long the firm has been around. Part of the reason is that it suffered two huge blowups as a result of market crises — but to its credit, the firm survived each time.
In 1998, Everest’s emerging-markets fund lost more than 50 percent, and Everest’s global fund fell by 40 percent, hurt largely by the Russian economic crisis and devaluation of Russia’s currency. The two funds then both lost about 50 percent in 2008, when the firm doubled down on emerging-markets stocks during the financial crisis and global stock market meltdown. Despite these staggering losses, today all eight of the firm’s funds have handily beaten their respective indexes since their inceptions.
Last month Everest Capital Global, which invests mostly in equities in developed and emerging markets, enjoyed gains from Brazil, India and the United Arab Emirates (UAE). In the firm’s May report to clients, Everest elaborated that Brazilian gains came from education companies and insurers in an otherwise weak Brazilian market.
Financial companies in India performed strongly, while real estate developers in the UAE “continued to contribute positively,” the firm said in the letter. The market there overall posted strong gains, “supported by the upgrade to MSCI Emerging Market status,” the firm said.
Everest Capital Emerging Markets, which primarily invests in equities, was mostly boosted by the so-called BRIC economies — Brazil, Russia, India and China — as well as real estate developers in the UAE. The Frontier Markets fund, which is a riskier version of a typical emerging-markets fund — a prospect that may seem redundant to some — profited mostly from gains in Nigeria, the UAE and Romania. Everest also stressed that Nigerian banks continued to be the biggest contributor to performance.
Looking ahead, all of Everest’s equity-driven hedge funds are positioned for stock market gains. Their net exposures range from a low of 80 percent for Everest Capital Latin America Opportunity and 86 percent for Everest Capital Frontier Markets to as high as 99 percent for Everest Capital Asia.
Everest Capital Global and Everest Capital Emerging Markets each have a 16 percent net exposure to sovereign debt, while Everest Capital Latin America Opportunity has a 19 percent net exposure to sovereign debt.
Everest Capital Asia has a 35 percent net exposure to currencies and a negative 5 percent exposure to commodities. Everest Capital Frontier Markets has a negative 11 percent exposure to commodities.
Meanwhile, Everest Capital Diversified Alpha has a 19 percent net exposure to equities. But this is an intentional goal of the fund, which invests across equities, fixed income, currencies and commodities, primarily in emerging markets. It also has a 20 percent net exposure to corporate debt and a 14 percent exposure to sovereign debt.
