Friday, 27 May 2016
Last updated 9 min ago
Sep 30 2008 | 3:16pm ET
The global market sell-off is making waves from Wall Street to the Kremlin. Pharos Financial Group’s trio of Russia-focused hedge funds all saw big declines last month as the credit and commodities markets sank and the dollar continued to strengthen.
Last month, the Pharos Russia Fund was down 7.8% (down 16.2% year-to-date), the Pharos Small Cap Fund was down 8.8% (down 17.5%YTD) and the Pharos Gas Investment Fund was down 2.3% (down 10.6% YTD) compared to the MSCI Russia Index, which declined 14.7% over the same period.
CEO and portfolio manager Peter Halloran said he’s protecting the portfolios with a combination of short futures, long puts and short equities. In an e-mail to investors today, Halloran said the pressure has intensified during September on markets around the world.
“Domestic banks and institutions became forced sellers in early September as a drop in asset prices led to calls on collateral. The Russian authorities have shown a willingness to intervene to protect against domestic dislocations caused by distressed selling,” he wrote.
Specifically, Halloran said the Russian government has announced a liquidity package of more than US $150 billion and has increased its deposits held at the largest banks and offered them repo lending that references inflated asset valuations. As well, state-owned Vneshekenom Bank will provide up to $50 billion to Russian companies and banks to help redeem the $65 billion of external debt coming due through the first quarter of 2009.
Given the relative size of the economy, Halloran said Russia is better positioned than most other countries to withstand a downturn in credit markets with its $581 billion of reserves and over $200 billion stabilization fund.