David Baran’s hedge fund, Symphony Financial has been outperforming its peers. His fund “rose by more than 14.8% while most hedge funds scrambled to preserve capital and global equities were selling off,” according to Forbes. So, what’s his secret for above par hedge fund returns?
David Baran’s Investment Strategy
David Baran has been “gambling on Chinese casino stocks, warrants and running a fund with the combined managerial experience of 20 years investing in emerging market Asia derivatives.” Baran says, “Once QE2 ended in June we started looking at our risks. We figured maybe there’s a QE3, maybe not. So we were defensive.” His team sought out warrants on individual companies like Hyundai that were trading at discount and went long. “We bought warrants of that were trading at a discount and were attached to volatile stocks like Galaxy Entertainment, a Macao casino company, Tencent Holdings and LG Chemical in Korea,” said Baran. “That helped us out in August.” His Symphony fund, Sinfonietta, returned 39.88% in August. It was its best month ever and the worst for many other hedge funds.
David Baran Also Took Several Short Positions
David Baran explained, “Another reason we beat the market in August is because we were short Chinese casino stocks.” He continued, “These things can go up or down 10% in a day and we shorted these stocks when they were high and as we moved into August all the hedge funds in Asia went short those funds so we covered and got out. We invested in them through derivatives, mostly warrants and put positions. We made money in August because we didn’t take on a lot of risk and we made money in currency positions like the Singapore dollar.” According to Forbes, “The fund has around 34% of its holdings in equities, 13% in corporate bonds, 19% in index futures, 5% in long options (calls and puts) and 73.6% in foreign currencies — mainly the dollar, euro, yen and singapore dollar pairs, playing one off the other.”