Daily Equity Report

Paul Tudor Jones is one of the more outstanding hedge fund managers with a long term track record extending back to at least 1987. He was featured in Jack Schwager’s original book on interviews with top hedge fund managers published in 1989. Tudor Investments is a macro global manager.

The book highlights Tudor Jones performance in October 1987, the month when global markets crashed. “That same month, the Tudor Futures Fund, managed by Paul Tudor Jones, registered an incredible 62% return.”

Tudor Jones is an aggressive trader, who started managing in September 1984 with $1,5 million under management and his firm, Tudor Investment, now manages around $11,57 billion – the bulk of the funds ($9,35 billion) are invested in the BVI Global fund.

His long term track record for the flagship BVI Global fund is fantastic.

Tudor Investments versus the S&P500

He highlights some of his thinking in his recent report to investors. He has called finding the best performing assets following the wall of money unleashed by central banks, the “Great Liquidity Race”

He says at present these appear to be gold, emerging market equities denominated in local currencies and commodity related stocks. He says that liquidity is making its way into bond purchases by banks, into equity markets, capital flows to emerging markets and away from the dollar. He expects this trend over the next quarter or two.

Like some other well known hedge managers, Tudor Investments has started buying into gold. He notes in his report, “I have never been a gold bug. It is just an asset that, like everything else in life, has its time and place. And now is that time. The economic and political comparisons to the late 1970’s are too numerous to ignore. And as such gold is at the centre of our thinking as a store of value during a period of potentially large and persistent global portfolio shifts. The temptation to directly, or indirectly, monetise rising and persistent fiscal deficits globally means gold could have a bid for the foreseeable future.”

The report included an appendix on their reasoning for buying into gold. Their economic model which evaluates the impact of inflation, money supply growth and real rates on the price of gold suggest that gold is 20% undervalued over the next 24 months.

In addition to this supply has remained steady, while demand, especially investment demand has been increasing. Exchange traded funds have been big buyers of gold, having “bought” the equivalent of 25% of new mine production since the beginning of the year and by the end of 2009 will own 3% of global available supplies, making them the sixth largest holder in the world.

They see a huge scope for the increase in these physically backed securities, saying “The private wealth universe of trillions of dollars is under exposed to gold and now can readily get exposure through exchange traded securities.”

The official government sector has turned from a net seller to a net buyer. Any incremental new demand cannot be met by supply and must be met from current holders, pushing up the price.

The fantastic record of the Tudor Investment’s BVI fund from 1987 relative to the US market, merits investors noting what they are saying.

Have a fantastic weekend and enjoy the Currie Cup finals.

Kind regards

Ian de Lange
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966