Horseman Capital has gone live from the start of July with
its latest fund, an emerging markets-focused vehicle managed by
The fund is a carve-out from European Select, the $634
million strategy headed up by Stephen Roberts (
see profile). As part of the main fund it has performed
well this year, gaining 17.14% to the end of June.
According to Burke, the newly standalone fund operates in a
markedly different fashion from a standard global emerging
markets (GEMs) portfolio.
"This is not the standard GEMs fund that aims to beat the
MSCI Emerging Markets index by 2%," he said. A long-term
thematic investor in the Horseman house style, his view is that
the commodity super-cycle that prevailed in the years leading
up to the financial crisis is now played out – and
that the spin-offs from this that dominate the conventional
GEMs portfolio will underperform as the industrial cycle
Accordingly, his portfolio is entirely non-constrained and
currently avoids banks and financials in general, as well as
manufacturers in industries with over-capacity.
The long book is positioned to invest in economies with
limited external funding requirements – with the
majority of exposure being in China, which runs a current
account surplus in excess of 2% of GDP.
"Within China aggregate savings are vast, and until now
banks have been underpaying depositors who effectively
subsidise loans to Chinese companies – a cycle that
has led to over-capacity," said Burke.
"Under the new reformist premier, we could well see interest
rate liberalisation –which would reward depositors and
lead to less funding for 'old’ industries, which
should lead to increased consumption whilst further negating
the investment case for 'old’ industry."
Burke also aims to add value through the short book, which
has seen the fund’s returns holding up well during
periods of market weakness.