Hedgie Howe gets new model for Christmas

The manager of the Opera Pan-Asia Fund hopes that a new net exposure discipline for 2011 will help his fund to side-step future crises.

Hong Kong-based hedge fund manager Bob Howe is manager of the Opera Pan-Asia Fund, which is the mid-2009 relaunch of an equity long/short hedge fund formerly known as Akamai Pan-Asia Fund.

The former fund management vehicle Geomatrix was sold simultaneously to Opera Solutions. Opera is a global analytics consulting firm owned by a Harvard section-mate to Bob Howe. After a year's development and live testing, the fund implemented a market-timing model in December 2010 with the hope of turning around what was a poor April-to-November performance stretch.

“If global or Asian equity investing is a nautilus of 80-20-5,” says Howe, “then country net exposure is the 80, sector selection the 20, and individual stocks the 5. By having a more reliable net exposure discipline, our fund managers can now focus attention more on sectors and stocks. There are several Opera innovations applied to those two levels.”

So what does the model advise them to do?

“For all of December and the beginning of January, the Opera/Geomatrix net exposure models are bearish on Hong Kong, and bullish on Japan, Korea, India and Australia,” says Howe. “Our longer-term view for 2011 is bullish, based on Marshallian K [monetary base/nominal GDP] recovering in the US and even in Japan, where monetary policy is finally, for only the third time in 20 years of a lost two decades, loosening just a tad.”

Another Harvard alumnus, Dorien Nunez of OMNI Research, has been appointed to help with business development and asset-raising in 2011.

As part of their marketing effort, Howe has penned a Dickens-inspired short study of five major markets – Ghosts of Crises Past – explaining events that influence policymakers' nightmares. It also explains the monetary bias of these stock markets.

“China will tighten until inflation ebbs, due to worry about their 'ghost', the 'Tank Man' student who stared down a line of tanks coming into Tiananmen Square," says Howe.

"Remember that the students were protesting not just corruption but also the price of cabbage, a student staple that had soared in price along with the CPI in general. India will always err on the side of growth, due to the shame of its lost three decades due to bureaucracy, and a serious poverty problem.”

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