While there is always a divergence of opinion and market analysis (the very essence of stock markets… race horses and marriages, i.e. a difference of opinion), rarely in the 15 years of managing emerging market hedge fund portfolios, has the Investment Advisor seen such a gorge dividing the extremes of both pessimism and optimism. Of course
depending on the asset class, Mr. Roach is in fine company with the equally
vaunted Nouriel Roubini, Meredith Whitney, Joseph Stiglitz, Marc Faber,
Bill Gross, and many others. Where is Elaine Garzarelli today?
On the other side of the trade (and again depending on the asset class) “Oscar – level” bulls abound in the likes of John Paulson, Jim O’Neil, Mark Mobius, Jim Rogers, Jeffrey Gundlach and Kenneth Fisher.
What does all of this mean to Diamond Age portfolio construction? Not much. The Investment Advisor’s research and analysis on both the global macro as well as the enterprise specific line items remains internal, original and organically generated. This simply serves to highlight that paper millions, if not billions of dollars will be lost (and
gained) as investors align their capital with the most talented, well intentioned, and brilliant professionals within the industry; as by definition, both sides of any trade can never be correct at the same moment.
Thus even after a harrowing May and a tough June of 2011 in which the benchmark MSCI EME finally caught the Fund after 28 months of the Fund’s stellar out-performance, there is neither a change in the Fund’s forward perceptions nor in the Fund’s investment methodology. Following a June performance of ‐4.88% (largely the same as global markets MSCI World ‐4.71%) but 3pp worse than the benchmark MXMU ‐1.88%, Diamond Age is not switching horses in mid-stride.