Monolith Management, a Hong Kong-based hedge fund specializing in technology investments, has achieved remarkable returns of 53% year-to-date. This success stems from strategic investments in key sectors like semiconductors, data centers, and a well-timed allocation to Chinese equities during September’s market rally.
Currently managing $300 million in assets, Monolith is poised for further growth with the launch of a new fund in January. This expansion will bring their long-short equity strategy to approximately $500 million.
Alt: Monolith Management’s 2024 year-to-date performance compared to industry benchmarks.
Goldman Sachs data indicates that Asian equity long-short funds averaged 12.8% returns through November. Monolith’s performance significantly surpasses this benchmark in a year marked by considerable market volatility. Global interest rate uncertainties, the U.S. election, and China’s stimulus measures have all contributed to this turbulent environment.
Alt: Chart illustrating market volatility throughout 2024, highlighting key events impacting market performance.
Monolith’s success is attributed to strategic bets on U.S. and Taiwanese semiconductor companies within the artificial intelligence supply chain. The fund also invested in U.S. data center infrastructure, including liquid cooling solutions, power systems, and network connectivity, according to co-founder Timothy Wang, formerly of Boyu Capital. Wang highlights the anticipated tripling of U.S. data center capacity in the coming years. Further gains were realized through exposure to cryptocurrency and bitcoin miners providing power to these data centers.
Capitalizing on China’s announced monetary stimulus in late September, Monolith increased its net exposure to Chinese equities, primarily in the internet and consumer sectors, to around 50%. This tactical allocation proved prescient. By October, the fund reduced its China exposure back to approximately 20%, effectively sidestepping the subsequent 17% downturn in Chinese shares.
Alt: Chart depicting Monolith Management’s strategic adjustments to China market exposure in 2024.
Wang emphasizes the importance of agility in navigating the Chinese market, anticipating increased volatility in the coming year due to the unpredictable nature of the current U.S. administration’s policies and high U.S. stock valuations. Monolith’s strategy for navigating this uncertainty involves strengthening hedging positions and maintaining cash reserves to capitalize on potential market dips. This proactive approach positions the fund to mitigate risks and seize opportunities in a dynamic market landscape.
