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New Managers June 2019

PROFILES: Blackcrane Capital , Diamond Standard

 

Hedge funds watch the trade war amid growing skepticism over the possibility of a resolution

How much longer can the trade war go on? Market observers are starting to raise concerns about potential impacts to the market if the trade war, which is now in its fourteenth month continues without a resolution.

James McCormack, global head of sovereign ratings at Fitch told CNBC yesterday, that he feels both the US and China are hardening on their positions. If both sides dig in, it could mean that a trade war resolution is less likely. "There is a risk that we end up with the two biggest economies operating in parallel tracks in many regards and not in a cooperative way and the world economy will suffer from that," he said. Daniel Kim, CEO and CIO of hedge fund Blackcrane Capital agrees. He says the market is still pricing in too much complacency on trade and adds that investors could be surprised to the downside. "The Chinese economy has revived too much for it to come to the table with a lot of concessions," Kim said in an interview with Opalesque . "We think people are being too optimistic that we will eventually come to a resolution."

Blackcrane's flagship strategy Overseas Alpha is designed to identify value opportunities that might arise out of issues like the trade war. The strategy looks for companies that may be unknown or out of favor but with strong fundamentals. The fund then looks for high conviction positions that are poised for growth despite being undercovered. Kim says that the trade war has kept his strategy out of Chinese companies generally, but has opened up opportunities to invest in companies that are not as trade war sensitive.

"We're looking for a longer term investment thesis when we pick our companies," Kim says. "We don't think that the trade war is going to be resolved quickly or efficiently so we want to identify those opportunities that are uncorrelate......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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