In Conversation With Liyann Seet (Partner at Taaffeite Capital Management)
Introduction
My name is Liyann Seet, and I am from Singapore. I am a Hedge Fund Partner, Founder of Yacht Luxe and International Children Foundation. My hedge fund, TCM Global Index Fund (Bloomberg Ticker: MACHINE_US), gained 97.15% last year, ranking the fund as the top-performing Global Macro Hedge Funds according to Barclay Hedge.
Fun facts about myself; I grew up playing touch rugby and contact rugby from the age of 13. I like combat sports; I used to live in a fight camp in Thailand to learn Muay Thai, Boxing and Krav Maga.
I am a fashion and commercial model signed with Upfront Models Singapore.
My Background
I grew up playing the position of the right-winger for touch and contact rugby. I loved the adrenaline of dashing through yards and sidestepping through players to finally dive down and score a try on the finishing line. Against my mother’s wishes, I often came home soaked in mud, with abrasions, fractured fingers and bruises.
Rugby was the highlight of my life; I was thrilled that I was the fastest girl on the team, and I was always the top try scorer in Rugby Championships. My childhood dream was to be a professional rugby player and a Christian missionary. But God had other plans for me. Our coaches trained us against boys who were genetically stronger and faster; a boy who weighed more than 80kg ran towards me and tackled me to the ground. He broke my ankle. I landed in the hospital. I was in a wheelchair and cast for six months.
Despite the doctor’s recommendation against rugby for the next few years, I played for the next club’s Championship but my injuries caught up with me. I was no longer the top try scorer, the fastest girl in the rugby club and I fractured my arm again. I knew my dream to play rugby as a career was over. It broke my heart.
Life After Rugby
At that time, I felt lost in life. I reckoned that I would never find another passion, and I had lost everything that I ever wanted. Yet, when one door closes, God opens another door. I had a church friend who was studying photography. After Sunday school, we climbed to the back of the church; she started taking pictures of me to build up her photography portfolio.
I uploaded her pictures on my social media profile, and a few modelling agencies came knocking on my door. I eventually signed an exclusive contract with a modelling agency. My church friend went on to build a successful film production company called Annabel Law Productions. To date, I am extremely thankful to her for kick-starting my career.
In the early 2000s, it was the television era and television commercials were well paid. My modelling agency would clinch commercial jobs for me. When I first entered university, I competed to enter SMU Students Management Investment Funds (SMIF), where I learnt the fundamentals of value investing. I would also work in private equity and investment firms that my father funded or invested in. Since joining the investment club, I would consistently invest my earnings, garnering returns of 20% - 40% per annum. All things work together for good; I might have lost my first love, rugby. But I found my passion in investing.
Journey to a Hedge Fund
After graduation, my corporate career spanned investment banking, corporate banking, private equity and real estate investments. After working for Far East Organization for five years, I received a call from a headhunter; a real estate private equity firm and a hedge fund were looking to hire me for my particular skill set. I chose the latter because I was impressed by the Chief Investment Officer’s investment strategy and the fund’s performance. I am thankful that he has taken me under his tutelage and graciously mentored me. Before meeting Ming Nan, my investment world was limited to value investing; yet global macro investment strategy has a wide investment universe that systematically allocates to 100 - 200 opportunities across equities, bonds, commodities and currencies. The diversification of my portfolio meant that I was investing in a broad set of global opportunities and the highest quality assets within each asset class.
Taaffeite Capital Management's Investment Strategy
Taaffeite Capital Management (“TCM”) Global Index Fund (Bloomberg Ticker: MACHINE_US) is a global macro multi-strategy hedge fund. This means it allocates to 100-200 leading opportunities across global equities, fixed income, commodities and currencies, with the goal of achieving more than double the performance of benchmarks like the S&P 500, whilst taking less risk.
“What is really exciting is investors get exposure to the best opportunities across global equities, global fixed income, commodities (including precious metals, base metals and agricultural commodities) and currencies. That really saves investors a lot of time, not needing to continue to rebalance or reallocate their portfolios as markets continue to present new opportunities,” says Liyann Seet, a Partner at the firm.
For example, instead of buying just US Treasuries, TCM selects a portfolio of the highest quality government debt bonds that are the most underpriced. The portfolio is also globally diversified and risk-neutral to absorb market volatility.
Fund Performance
In 2020, TCM Global Index Fund (Bloomberg Ticker: MACHINE_US) gained 97.15% for investors (after all fees and expenses), ranking the fund as one of the top-performing Global Macro Hedge Fund, according to Bloomberg. Our fund has had a compound annual growth rate (CAGR) of 23.48% per annum since our inception in 2013. Our Sortino Rate is 1.84, and Sharpe Ratio is 0.89 with downside volatility of just 13.85%.
TCM's Key Personnel
We are Macro specialists. Our investment strategies are long term, research-based and conviction-led. Our team has quantitative expertise spanning equities, fixed income, commodities, currencies and derivatives.
The hedge fund was founded by Howard Siow, and he is the CEO of TCM with over 20 years of experience as a money manager. Mr Siow was previously the CEO of a global corporation and a management consultant with PricewaterhouseCoopers, Bain International and Accenture.
Our Chief Investment Officer is Ko Ming Nan, with over 12 years of experience as a money manager, specializing in portfolio construction across the fixed income and equity markets; he was a fund manager at SGX listed IFS Capital and GHFM, where he was responsible for managing up to USD $40 million, returning 52.40% in 2019 and 97.15% in 2020 for TCM, YTD estimated return stands at about 21%.
The Advantages and Limitations of AI
Advances in AI are able to find very subtle patterns and relationships in large data sets. As an example, it is able to identify an object or a face in a crowd. We apply similar techniques to scan a large universe of global equities, fixed income, treasuries, commodity and currency markets, and assign probabilities to the future price of all of the instruments. This makes a probability density function, or a 3D map for each of the instruments, showing their probabilistic price over time.
The portfolio is created from that large universe, and each position is weighted based on the expected return, expected risk, and correlation between the instruments. The portfolio is then accordingly rebalanced daily.
What is important is the portfolio is risk-neutral. This means the risk-on is equal to the risk-off positions to reduce the downside risk of the portfolio. Risk-on positions are referred to positions that are typically correlated with risk-on market sentiment and vice versa for risk-off positions.
How TCM Differentiates Itself From Other Hedge Funds
Based on the Modern Portfolio Theory, TCM uses diversification to improve the risk-adjusted returns compared to a straight equity index portfolio. Whilst TCM might look similar to other global quant macro strategies, there are two important distinctions that are worthwhile emphasizing:
The positions in TCM’s portfolio that are correlated to general risk-on market moves equal the positions that are correlated to general risk-off market moves on a volatility adjusted basis. Experience from empirical evidence shows, about once or twice a year, market events cause systemic movements (when risk-on and risk-off positions become highly correlated). This can cause temporary drawdowns of up to 10-15%. The fund has successfully weathered these temporary drawdowns to generate strong positive returns over the target 1-3 year return window.
TCM’s proprietary AI system is a key advantage to selecting the optimal portfolio. Using diversification to optimize risk-adjusted returns depends on the quality of potential opportunities identified in extrapolating future returns, future volatility, and future covariances of each instrument.
Advice for Those Beginning Their Careers
If you want to achieve your dreams in life, you have to consistently work harder on it than anything else and put in the hours. You can work smart, and having a good network helps, but so much of success in whatever you want to achieve is down to the work and dedication you bring to the table. You can’t expect to cruise through life, and your career and miraculously sit on the throne of your field. Nothing beats sheer hard work. Don’t pray for an easy life; pray for strength to ensure a tough one. After all, a gem cannot be polished without friction, nor man perfected without trials.