Volatility's a Friend for Asian Hedge Fund Bucking Market Trend

(Bloomberg) -- One hedge fund in Asia is making the most of volatile markets, extending gains this year to 24 percent as stocks in many geographies tumble.

True Partner Fund returned 4.8 percent last month, according to its latest newsletter. Driving gains were trades that bet on the actual volatility of South Korea’s Kospi Index jumping more, relative to the option-implied volatility, than the volatility experienced by Taiwan’s Taiex, Hong Kong’s Hang Seng Index and Japan’s Nikkei 225 Stock Average gauges.

“U.S. rates are back toward the highs, trade tensions remain and we still have the usual skirmishes around European finances and Brexit,” True Partner’s newsletter said, outlining the fund’s market views. "A further bout of anxiety could trigger a disorderly unwind."

The hedge fund industry as a whole lost 2.2 percent in October and is down 2 percent this year as stock pickers to macro traders faltered, according to the Eurekahedge global hedge fund index. U.S. equities had their worst month since 2011 while the MSCI World Index plunged 7.4 percent in its biggest monthly drop since May 2012.

True Partner, which manages around $541 million, was started by a group of former traders from Dutch options market maker Saen Options BV. Its relative-value hedge fund uses computer models to spot investment opportunities. According to investor newsletters, the fund has made money in all but two years since its inception in mid-2011. With the October gain, it’s headed for its best year ever.

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