28 Feb 2011
Pedro de Noronha is worried about the world. The founder of London hedge fund firm Noster Capital, and one of Financial News’ 2010 Rising Stars, thinks emerging markets economies look overheated and, while their sovereign credit looks good now, the situation could change overnight.
De Noronha, a former professional surfer in Portugal who worked for Merrill Lynch and JP Morgan before setting up Noster in 2007, said: “Emerging markets are trading at unprecedented valuations. It’s such a crowded trade that now is the best time to take the opposing view.”
De Noronha has been long credit default swaps on emerging markets since last year in his Noster Global Value fund, a long/short equity strategy that focuses on value investing, and has added to these positions.
The fund is a concentrated portfolio of 12 to 15 positions, which he is running with a net long exposure of 60%. It was up 19.3% last year and gained 5.4% in January, mainly because several long positions it had held for some time paid off.
One was Golar LNG, a natural gas shipper. It rose 16.3% last month, partly reflecting a tightening of the liquid natural gas market and news reaching the market that Golar had contracted five of its vessels.
De Noronha also likes Canadian asset manager Sprott. He said: “We always look for an alignment of investors with the owner and Eric Sprott owns 70% of it.” Noster bought the company at $4 per share and it is now trading at $9.20. While de Noronha holds long positions for months or even years, in the short book he typically looks for a catalyst for the stock price to fall.
He has a short position in Netflix, a US company that offers online film subscriptions, as he thinks the company looks vulnerable. In December, hedge fund T2 Partners, one of Netflix’s most vocal shorts, announced it had closed out its position. De Noronha said: “This is usually the time I like to get in.”
De Noronha has been long credit default swaps on emerging markets since last year in his Noster Global Value fund, a long/short equity strategy that focuses on value investing, and has added to these positions.
The fund is a concentrated portfolio of 12 to 15 positions, which he is running with a net long exposure of 60%. It was up 19.3% last year and gained 5.4% in January, mainly because several long positions it had held for some time paid off.
One was Golar LNG, a natural gas shipper. It rose 16.3% last month, partly reflecting a tightening of the liquid natural gas market and news reaching the market that Golar had contracted five of its vessels.
De Noronha also likes Canadian asset manager Sprott. He said: “We always look for an alignment of investors with the owner and Eric Sprott owns 70% of it.” Noster bought the company at $4 per share and it is now trading at $9.20. While de Noronha holds long positions for months or even years, in the short book he typically looks for a catalyst for the stock price to fall.
He has a short position in Netflix, a US company that offers online film subscriptions, as he thinks the company looks vulnerable. In December, hedge fund T2 Partners, one of Netflix’s most vocal shorts, announced it had closed out its position. De Noronha said: “This is usually the time I like to get in.”
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