Singapore-based Vanda Global Fund Ltd., up 278% through July, has delivered an average annualized return of 40% since inception and is the best-performing hedge fund in the world according to a recent article in Bloomberg (data from Eurekahedge Pte).
But when the fund was launched three years ago with $24 million from friends and family, founder Chong Chin Eai “considered using his own savings to cover investors’ losses and shut up shop” as he “watched Donald Trump’s shock election victory roil markets.”
Instead, the article reports, Chong stuck to his investment strategy, explaining, “A lot of fund managers would’ve just given up after six months to start a brand new track record, but I wanted to show investors the flow of the fund and the growth of the fund, both in terms of the performance and also in myself.”
The fund, which currently has $194 million of assets under management, invests in exchange-traded futures and the article reports has “more than 100 across asset classes from commodities and government bonds to equity indexes.” Futures, it notes, “are an often highly leveraged class of financial instrument that can mean big returns, or steep losses.”
According to Eurekahedge analyst Mohammad Hassan, the fund’s volatility is similar to that of cryptocurrency investing: “There’s always that risk in these high-octane strategies that funds might blow up when things don’t go their way. But in 2018 and 2016, when the markets were tough for this kind of strategy, he didn’t lose as much as he could have, so the upside capture is still pretty decent.” The article reports that in 2017 the fund gained 260% but the following year suffered losses of 49%.
In order to offset some of the risk involved in his exchange-traded derivative contracts, the article notes that this year Chong adopted a new strategy that allocates up to half of the fund into liquid money market accounts.