By Nell Mackenzie
LONDON (Reuters) - Hedge fund Eisler Capital marked a 5.54% positive performance for the year to the end of September, it said in a letter to investors, with its bets hinging on China's economic recovery.
The $3.8 billion multi-strategy hedge fund invests in several asset classes affected by a renewal of Chinese demand, from metals, to derivatives and stocks, it said in a letter seen by investors this week.
"The team believe that market sentiment on China appears to have pivoted, as the accumulative piece-meal stimuli of the Chinese government starts to take effect," the letter seen by Reuters on Thursday said.
China is expected soon to unleash fresh fiscal stimulus to shore up its economic recovery, drawing on a well-used playbook that relies heavily on debt and state spending but falls short on the deeper reforms called for by economists.
The International Monetary Fund warned on Oct. 13 that China's embattled recovery and the risk of a more protracted property crisis could further dent Asia growth.
Aside from China, fixed income positions, which Eisler Capital is known for, helped the hedge fund post its best monthly performance this year, with a positive 1.29% September result, the letter said.
Wagers on U.S., European and U.K. government bonds and swaps profited, the letter said.
Eisler's fixed-income trading strategy continues to play the difference between the timeline of the U.S. Federal Reserve ending its rate-hiking cycle and economic conditions in Europe.
Stock positions on semiconductor and tech companies also added to positive performance.
Losing bets on precious metals, relative value stock trades and corporate credit exposure to healthcare and communications companies detracted from performance, the letter said.
Eisler Capital's September result falls roughly in line with multi-strategy hedge funds to Oct. 18, which have posted a 5.9% return so far this year, the hedge fund specialist Aurum said this week.
Eisler Capital declined to comment.