Hedge fund manager holds short position on Japanese government bonds- report
In his column on The Independent, Hargreaves Lansdown Head of Research Mark Dampier wrote about the strategy undertaken by William Littlewood who manages the Artemis Strategic Assets Fund. The hedge fund manager holds the view that the policies that are currently undertaken by Western governments deep in debt will be inflation or default.
According to Dampier, Littlewood's portfolio was comprised of 66% equities, 9% commodities and 25% cash. To take advantage of falling asset prices, the fund manager has a short exposure of 14% in equities which brought to 52% his net equities exposure in all. As far as his short position goes, he has shorted nearly 100% of the value of the funds through the use of derivatives. Most of these shorts are in bonds.
Majority of his short position or 64.5%, is on bonds issued by the Japanese government. Littlewood is betting against a Japanese recovery, citing the factors that supported his theory. The hedge fund manager said Japan had lots of debt, an old population and quantitative easing undertaken on a massive scale. Littlewood also called on history to support his short position on the country's bonds. In the 1930s, Japan experienced a depression which prompted the government to print lots of money. The government used this for various projects which were initially good for the economy but eventually led to inflation levels that skyrocketed. Littlewood said that if a similar event happens again, the prices of Japanese government bonds would also plunge. This would be beneficial for the fund.
Littlewood also has taken a short position on the Japanese yen as well as the Australian dollar. The manager believes that the fate of the Chinese and the Australian economies are closely intertwined. He thinks that the sluggish Chinese economy will be detrimental to Australia and its currency as well.