Bailey McCann, Opalesque New York for New Managers:
While many hedge funds ended 2018 in the red, the Richmond Global Compass Fund was up +9.99% net of fees. The fund runs a discretionary global macro strategy that that integrates Environmental, Social and Governance (ESG) metrics into fundamental research. The strategy launched in mid-2017 and is up +21.37% since inception.
The strategy is split between a net long equities position and fixed income. Position sizing on each side of the book is opportunistic based on where the fund’s portfolio managers view the market.
According to the firm’s December investor letter, which was reviewed by Opalesque, the decision to tighten in response to late cycle behavior has helped to preserve capital and bolster returns. Allocations throughout the fourth quarter were made based on which parts of the market would be least sensitive to volatility. On equities, Compass was protected in its single-name picks by incorporating ESG metrics into its analysis.
In the letter, the firm says a cooling of trade tensions between the US and China as well as a lower probability of further interest rate hikes by the Fed will make for a cautiously optimistic start to the year.
An investment in Egyptian sovereign debt turned out to be a big win for Global Compass. Citing improvements in the Egyptian economy, currency and social reforms, the fund says that it is well positioned to participate in what is likely to be an appreciation of Egyptian assets over the next few years. Indeed Standard Chartered predicts that Egypt is on pace to be included as one of the worlds 10 largest economies by 2030.
Egypt is also notable for its desire to issue debt in currencies other than the US dollar. A Reuters report notes that Egypt plans to issue $2 billion worth of Japanese yen-denominated bonds in the coming week as part of a broader effort to diversify its currency exposures.
