| Marko Dimitrijevic, Everest Capital (Bloomberg) |
All but one of the funds managed by Marko Dimitrijevic’s Everest Capital extended their gains in August, making them among the best-performing macro and emerging-markets hedge funds through August. The Miami-based firm, which invests globally but with a strong emphasis on emerging markets, reported that four of its six hedge funds and both of its long-only funds have posted year-to-date gains in the mid- to upper teens. Three of the funds are outperforming their respective benchmarks.
They include the firm’s oldest fund, Everest Capital Global, launched in 1991. The fund, which invests mostly in equities in developed and emerging markets, rose 2.8 percent in August and is now up 15.5 percent for the year, more than double its benchmark, the MSCI AC World Index. It accounts for $610 million of the firm’s $2.9 billion in assets.
Last month Everest Capital Global’s gains — and those of several other funds — were led by investments made in the United Arab Emirates, according to its August report to investors. These include an unnamed real estate company that the firm says beat estimates and announced a large new project, and a financial firm.
Everest Capital Global also benefited from Brazilian education companies and banks. “[They were] supported by a strong overall Brazilian market that rallied primarily on polls pointing to an increasingly competitive presidential race,” Everest states in its report.
It also gained from several currency positions, including shorting the tumbling euro. On the other hand, it lost money on positions in Argentinean sovereign debt and a Norwegian oil and gas services investment.
Looking ahead, the fund’s net exposure in its equity portfolio is 105 percent, way up from just 92 percent three months earlier. In that period, its net exposure to Asia rose from 45 percent to 53 percent, while its net exposure to Europe dropped from 21 percent to just 1 percent. The fund’s exposure also went from a 13 percent net short position in the U.S./Canada portfolio to net short 2 percent. In currencies, it went from 1 percent net short at the end of May to 65 percent net short, mostly in Asia (the yen) and Europe (the euro).
Everest Capital Emerging Markets, which primarily invests in equities, gained 2.2 percent in August and is now up 19.6 percent for the year, compared with 10.6 percent for the MSCI Emerging Markets Index. The $570 million fund also benefited from gains in the United Arab Emirates and Brazil, as well as from Saudi Arabia.
“Positions in Saudi Arabia extended their gains on the back of last month’s cabinet decision to open its stock market, the region’s largest, to direct investment by foreign financial institutions in 2015,” Everest explains.
The fund’s equity portfolio is now 84 percent net long, down slightly from 87 percent in May. However, since then it cut its net exposure to emerging Asia and lifted its net exposure to Latin America.
Everest Capital Global Emerging Equity, a long-only fund, returned 3.7 percent in August, beating its MSCI Emerging Markets benchmark, which rose 2.3 percent. The fund is now up 16.5 percent for the year versus 10.6 percent for the benchmark.
One fund, however, continues to struggle. Everest Capital Asia lost 2.6 percent in August and is now down by 1.5 percent for the year. The fund has also vastly underperformed its benchmark for the most recent one-year, three-year and five-year periods.
Its biggest losers in August were electronics positions in Japan. The firm notes that after posting three months of gains, the overall market “retreated primarily due to economic headwinds.” China was also a drag on performance, especially from an unnamed real estate company “mostly due to a weak property market,” according to the report. “Additional losses in China were incurred in an auto manufacturer that saw consolidation after posting in line earnings,” the firm adds.
Looking ahead, the fund remains positioned optimistically. It is 106 percent net long, with the biggest net long bets placed on China/Hong Kong and Japan, which combined account for more than 70 percent of the net long exposure. Its currency portfolio is 26 percent net short the Japanese yen, underscoring its big bet on Japan.
