Former Goldman Sachs Partner’s Hedge Fund Pivots Away From China
Former Goldman Sachs Partner’s Hedge Fund Pivots Away From China
(Bloomberg) -- Former Goldman Sachs Group Inc. partner Ryan Thall is pivoting his hedge fund firm away from China investments, as Beijing’s credit tightening in the property sector and zero-Covid policies weigh on the economy.
Thall’s Panview Capital Ltd. has cut Greater China to 20% to 60% of total investments, including long and short positions. When the firm started in 2019, investors were told the region would be its largest, accounting for 40% to 80% of investments. The Hong Kong-based firm is debating a further reduction, it told investors in a quarterly letter seen by Bloomberg News.
Thall’s Asia-focused hedge fund returned almost 6.8% in the first quarter, driven by bullish bets on energy and materials as well as bearish wagers on China, according to the letter. Just over one-fifth of Asia-focused hedge funds ended the quarter with positive performances, preliminary data from eVestment showed late last week. On average, they lost 6.5% in the three months, according to a Eurekahedge gauge.
The commentary came after what the firm described as “one of the most brutal selloffs” in Thall’s 25-year career in early March. Chinese officials have since tried to restore investor confidence, with limited success as the stock-market rout resumed in recent days.
“The fundamental challenges to the economy in our view remain real and unchanged,” Panview said in the letter. “While we are as relieved as anyone that the government is reducing the risk of a hard economic landing and ultra-bear market, that alone does not make us turn positive on China as an investment opportunity.”
Jesse Lentchner, Panview’s chief operating officer, confirmed the content of the letter while declining to comment further. Panview’s Greater China investments include companies in mainland China, Hong Kong, Taiwan and Macau.
Stock Turmoil
Onshore and offshore-listed Chinese stocks dived in the first half of March on a confluence of concerns, from curbs to contain fresh Covid outbreaks to fear of sanctions against China for maintaining ties with Russia during its invasion of Ukraine. Now stocks are again falling on concerns that lockdowns will widen, hammering the economy.
Panview is joining the likes of Shanghai Banxia Investment Management Center in cutting China stock investments. One of China’s top-performing macro hedge fund firms, Banxia exited all of its stock exposure in anticipation of a worsening economy and further declines in equities, founder Li Bei told Bloomberg News.
Thall once co-led Asia investments for Goldman Sachs Investment Partners with Hideki Kinuhata before striking out on his own. Panview oversees about $350 million of assets.
China-focused stock hedge funds bore the brunt of the rout in recent months. On average, they lost nearly 11% in the first three months, according to Eurekahedge. Just under 12% reported positive quarterly returns to eVestment as of last week.
Despite the recent signals of loosening, Beijing is unlikely to reverse course on the two most critical issues: property and Covid, Panview wrote in the letter. The economic slowdown presents many opportunities for bearish wagers on single stocks, both in China and elsewhere, it added.
They abound in retail, luxury and other consumer segments, where venture capital and private equity helped fuel “excessive optimism on ‘new consumption’ concepts” in the last few years, Panview said. Those companies also relied on demand fueled by subsidies and strong consumer confidence, which will likely fade, it said in the letter, without naming any stock.
“The consumption of what previously were perceived to be ‘disruptive’ products could weaken significantly in growth rate, if not facing actual declines,” it said.
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