Crunch To Worsen
Sydney Morning Herald
Tuesday August 19, 2008
JAMES PACKER'S listed hedge fund Ellerston GEMS has warned its unit holders that the "credit crunch is going to get worse", and is holding 20 per cent of the fund in cash to preserve capital.
In a newsletter marking the fund's first anniversary, Ashok Jacob, Ellerston's chief investment officer, told investors "schizophrenia is back" in the market. "Extreme discontinuities are emerging and it's the same old story - the US is transporting volatility, and Europe and Asia are becoming terrified about the US financial contagion and various meltdown scenarios." Mr Jacob has been a stock picker for Mr Packer and his late father, Kerry, for many years - and a director of the private family company, Consolidated Media Holdings, for nearly 10 years. Mr Packer owns 14 per cent of the fund; Ellerston Capital, which manages the fund, oversees a further $800 million of private Packer family funds. GEMS lost just under 4 per cent of its value in its first year but outperformed the ASX 200, the S&P 500 and the MSCI World index - a benchmark for global stock funds - all of which lost about 13 per cent. Ellerston listed last year with units priced at $2.50 but has traded as low as $1.66, and closed yesterday down 3.5c at $1.78. As its unit price sank in recent months, Mr Packer's private investment company soaked up stock, increasing his stake to 14 per cent from 8 per cent. Ellerston listed with $600 million of assets, which were worth $576 million at the end of June, and doesn't hold out any quick fix to the market woes. Mr Jacob said the credit crunch would get worse and "making money is going to be a far more volatile exercise than in the past five years". Ellerston said its "major losing theme" in June was its exposure to agricultural stocks GrainCorp, ABB Grain and Australian Wheat Board, which fell by more than 30 per cent in that month.
© 2008 Sydney Morning Herald
