Those funds might think they have their positions hedged, but because of the sudden nature of the RMB’s depreciation, it made their hedge less effective.
Q: Do you still believe that China-focused hedge funds will outperform going forward?
A: Yes, I do. In fact, they have done that during the past 12 months, outperforming their Asian peers by at least 5% to 10%. They also outperformed their global peers.
Going forward, we will see the good ones survive and thrive, while some underperformers will fail. That will make the group as a whole stand a better chance to achieve good returns.
About Theodore Shou:
Theodore Shou is the international chief investment office at fund of hedge funds manager, Skybound Capital. Before joining Skybound in 2011, Shou worked at HSBC Private Bank, responsible for manager selection, as well as in a family office in Hong Kong called HGI Capital.
(The transcription is edited for clarity)