Singapore Hedge Fund

Alternative asset management in Singapore

Asian hedge funds fall 0.4 pct in August but up 13.1 pct in 2009

Asia-focused hedge funds fell 0.4 percent in August after five straight months of gains, pulled down by sharp declines in China, Hong Kong and Taiwan shares, hedge-fund tracker Eurekahedge said.

Japan hedge funds edged up 0.7 percent, North American funds rose 1.8 percent, Latin American funds gained 2.1 percent and European funds returned 2.6 percent, the Singapore-based firm said in a statement received on Wednesday.

Asian hedge funds have gained 13.1 percent since the start of the year, after a 20.3 percent drop in 2008, according to Eurekahedge, which said its estimates are based on preliminary data.

Eurekahedge also said in its statement that hedge funds globally attracted net inflows of $4.5 billion in August, with over 50 percent of funds tracked by the firm reporting new inflows from investors.

Globally, all hedge fund investment strategies showed positive returns in August, led by funds investing in distressed debt which returned 6.23 percent average, Eurekahedge said. The weakest performers were commodities trading advisers and managed futures funds, which returned 0.5 percent.

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Recruitment starting again for hedge funds based in Singapore and Hong Kong.

From, some good news on Asian Hedge Funds with new activity noted in Singapore and Hong Kong. The dark days may at last be over for Asia’s hedge fund sector, but recruitment is still selective, senior and sales-focused, with a real recovery not expected until next year.

Hedge funds are making a minor comeback after suffering their worst year on record in 2008, outperforming global benchmarks and experiencing an inflow of new assets, according to data provider Eurekahedge.

Asia has experienced a lot of the recent action. Winton Capital Management, for example, is starting a new fund in Japan and hiring staff in Hong Kong – its expansion coming just months after rivals like GSO Capital Partners, HBK and Ramius retreated from the region.

And ex-bankers are seizing the opportunity to start up their own firms in Asia. The list of budding fund managers includes: Nick Taylor, ex-head of Citadel Investment’s principal investments business in Asia and Europe; Shafiq Karmali, a former Goldman Sachs trader; and Edwin Wong, previously a Lehman Brothers MD.

Hedge fund recruitment is for now small-scale and focused on the front office. Jared Ng, regional consulting director, PeopleSearch explains: “Because short-term revenue is essential for the survival of companies to meet their short-term liability, revenue-generating jobs are more in demand. As a result, there have been more openings for sales positions.”

Peter Douglas, Asia Pacific council member for the Alternative Investment Management Association, says funds want experienced professionals who can hit the ground running. “In Singapore, Artradis, for example, has been taking on some senior people, basically taking advantage of a cyclical opportunity to add talent that’s now available,” he adds.

Funds that have not been so badly affected by the financial crisis are starting to recruit again after lying low for the past nine months, says Angela Kuek, manager, banking and financial services at Hudson in Singapore.

Douglas thinks the current fund inflows in Asia are coming mainly from specialist investors. The “real volume” is likely to return next year when more capital enters the market. “Asset size directly drives revenues and therefore the capacity and inclination to hire,” he adds.

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Asia Hedge Funds on ‘Radar’ After Beating Peers, Citigroup Says

Asian hedge funds are attracting growing interest from investors as managers focusing on the region outperform global peers, said Andrew Hill, director of prime finance for Asia-Pacific markets at Citigroup Inc (C:NYSE).
There are pockets of proprietary money looking to be put to work in Asia, Singapore-based Hill said in a June 12 interview. There is going to be an outsized investment back into Asia. Some of the big pensions are going to be looking at Asia; it’s coming onto the radar screens.
Asia-focused hedge funds gained 12.4 percent in the first five months of the year, outpacing returns in the U.S. and Europe, according to Eurekahedge Pte. That’s a reversal from last year, when clients withdrew almost $24 billion from the region’s hedge funds as managers posted bigger losses than global peers, the Singapore-based industry data provider reported.
We don’t see money rushing back in yet, but there’s certainly a level of dialogue that’s picking up, Hill said. It’s both for existing managers with capacity and newer ones with solid business plans and institutional infrastructure.
Investors are allocating small amounts in Asia and getting their feet wet in anticipation of a faster economic recovery in the region than in the West, said Alex Mearns, chief executive officer at Eurekahedge.
Economies in the Asia-Pacific region may expand 4.3 percent in 2010, compared with no growth in the U.S. and a contraction of 0.4 percent in the euro-area economy, according to the International Monetary Fund.
‘Potential Growth’
European and U.S. investors should allocate money to Asia to capture potential growth not available in their home countries, said Frank Brochin, managing director at New York- based StoneWater Capital LLC, which invests about $100 million in Asian hedge funds.
It makes sense for them to invest in Asia through on-the- ground managers able to identify companies capable of delivering significant growth over long periods of time, Brochin said.
The firm favors Asian managers that bet on rising as well as falling stocks, in particular those that have a majority of their bets on rising shares, he said.
An index tracking Asia-focused long-short funds rose 9.3 percent last month, the best performance of nine groups followed by Eurekahedge, after the strategy slumped 22 percent last year. About 180 funds closed in the region during last year’s global market rout.
A solid market for stock picking is coming back, said Citigroup’s Hill. Many of the trading-oriented strategies continue to do well. There’s a lot of opportunity out there and it’s less crowded.

From Financial 24

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Ex-Lehman, GIC Managers Fuel Asia Hedge-Fund Industry Renewal

June 12 (Bloomberg) — Former Lehman Brothers Holdings Inc. and Government of Singapore Investment Corp. traders are among an estimated 32 hedge-fund startups in Asia that are offering strategies beyond equities, after a record 180 funds closed in the region during last year’s global markets rout.

About 65 percent of hedge funds in Asia trade only equities, compared with a global average of 44 percent, data compiled by Singapore-based GFIA Pte and Eurekahedge Pte show. As a result, Asia’s managers underperformed their peers from Europe and the U.S. after the MSCI Asia-Pacific Index fell 43 percent in 2008, the biggest drop in its two-decade history. The U.S. benchmark Standard & Poor’s 500 Index declined 38.5 percent last year.

Mark Ong, the former head of global credit at GIC, manager of Singapore’s foreign reserves, is starting a hedge fund to exploit price discrepancies in the credit and equity markets. Paul Penkett and Stephen Cheng, former Lehman traders, started a fund in Hong Kong to trade everything from stocks to currencies.

“Having a diverse choice of strategies should help the Asian industry perform better than the market,” said Stefano Pizzo, managing director of Geneva-based Unigestion Holding SA, which invests in hedge funds. “It should also attract more investors.”

An index tracking Asia-focused long-short equity funds fell 22 percent in 2008, Eurekahedge reported. That compared with the 19 percent decline of the average hedge fund, according to Chicago-based Hedge Fund Research Inc.

‘Renewal Phase’

“This will be a renewal phase for the industry after the massive destruction last year,” said Melvyn Teo, a director at the BNP Paribas Hedge Fund Center at Singapore Management University. “Raising money is going to be tough though, despite the uptrend in the market.”

There were 17 new Asian hedge funds that started in the first five months of 2009 and another 15 may be set up, said Peter Douglas, a principal at industry consulting firm GFIA. The number of startups slowed to 17 in the second half of 2008 from 26 in the first half, Eurekahedge reported.

“Conservatively, we will see a net increase in the number of Asian hedge funds” through 2010, Douglas said.

The region’s hedge fund industry has been more focused on equities because most managers that emerged about a decade ago from the Asian financial crisis, which followed the July 1997 devaluation of the Thai baht, came from investment firms that bet on rising stock prices, a strategy known as long-only, Douglas said.

The number of new managers in Asia fell 26 percent to 43 last year from 58 in 2007, Eurekahedge said. There were only five startups in the fourth quarter, after last September’s collapse of Lehman froze credit markets. About 180 hedge funds shut in 2008 in the region.


“With the shakeout in the last two quarters of 2008, a lot of hedge fund managers who weren’t so skilled left the industry,” said Han Ming Ho, who heads the funds practice group in Singapore at law firm Clifford Chance LLP. “We’ve really seen a much stronger profile of startup managers come to our doors.”

There may be more startups next year than in 2009 as capital-raising opportunities improve, Ho said. Managers plan to introduce so-called macro funds that seek to profit from broad economic trends and funds that invest in so-called distressed assets, he said.

“I haven’t stopped talking to startups since the beginning of the year,” said Ho, who helped open at least two hedge funds in the first quarter.

Macro Funds

Macro funds will likely be the best-performing strategy this year, a Deutsche Bank AG survey published in March said. About 47 percent of 1,000 investors surveyed in February by Germany’s largest bank said they plan to add allocations to macro funds this year, more than double the 21 percent in 2008. About 41 percent of the investors plan to add bets to distressed funds, according to the survey.

Andrew Gale, a former London-based executive at Dexion Capital Plc who started a macro fund on June 1, said investors are seeking returns that are uncorrelated with market swings.

“People are looking for strategies that are more skill- based than beta driven,” he said.

Gale co-founded Cavenagh Capital in Singapore with Lee Ka Shao, a former managing director of DBS Holdings Ltd.’s Central Treasury Unit. Lee produced returns that averaged 38 percent a year for the Singapore-based bank’s principal strategies business from 2001 to 2007.

Anurag Das, a former managing director at New York-based King Street Capital Management LLC, set up Rain Tree Capital Management in Singapore to start a distressed, event-driven and special situations fund.

Ong, who was a managing director at Merrill Lynch & Co.’s principal investing unit in Singapore, declined to give details on his capital structure fund at Barker Investment Management. Former Lehman Brothers traders Penkett and Cheng opened Omnix Capital Ltd. and started an Asia-focused multistrategy fund in May, Cheng said.

From Bloomberg

Jean Viry-Babel
senior partner
VBK partners

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Flowering Tree Investment Management Pte

I came across this new fund on Bloomberg… worth keeping an eye on…

June 4 (Bloomberg) — Flowering Tree Investment Management Pte, set up by the co-founder of New York-based Sansar Capital Management LLC, plans to grow its Asian equities hedge fund by about 20 times its starting capital within the next two years.

The Singapore-based fund made its first bets on rising and falling stocks in Asia outside Japan last month, starting with $12.5 million sourced from founding members, family and friends, founder Rajesh Sachdeva, 40, said in an interview yesterday. It will grow to $15 million to $16 million by July, and plans to reach $200 million to $300 million in two years.

Flowering Tree’s startup will have to source funds from a smaller pool after clients withdrew almost $24 billion from the region’s hedge funds last year, according to Eurekahedge Pte data. An index tracking Asia-focused long-short funds rose 4.2 percent in April, the best performance of nine groups followed by Singapore-based Eurekahedge, after the strategy slumped 22 percent in 2008 in the industry’s worst year on record.

“Equity-focused funds right now would probably be able to pull in some money given the optimism in the market, although a lot of people believe this rally might end pretty soon,” said Ankur Samtaney, an analyst at Eurekahedge. “Investors and managers are taking a cautious approach at this time.”

The regional benchmark MSCI Asia-Pacific excluding Japan Index has rallied 63 percent since its March 2 low after tumbling 53 percent last year. Members of the index are valued at an average price of 1.8 times the book value of their assets, compared with 2.5 times in 2007, before stock markets collapsed, according to data compiled by Bloomberg.

‘Fertile Environment’

A “fertile environment for stock picking,” will help the fund build a track record to lure investors, Sachdeva said. “It’s a great time to be picking stocks right now; it’s not a great time to raise money.”

Sachdeva was a partner from 2005 to 2008 at Sansar Capital, a New York-based firm that manages an Asian equities hedge fund, where he helped assets under management grow to $3 billion. He was unable to give performance details for the Asian fund.

He was previously an investment analyst at Kingdon Capital Management LLC and Alliance Capital Management Holding LP, now known as AllianceBernstein Holding LP.

Flowering Tree’s new fund’s equity long-short strategy is more likely to work this year and in 2010 than last year, when companies’ fundamentals were ignored during “a period of extreme market dislocation,” said Sachdeva.

Sachdeva said the fund will reduce its long and short positions in volatile markets.


“You size up your balance sheet significantly when it’s working and significantly shrink your balance sheet when it’s not,” Sachdeva said.

Flowering Tree, which has a team of 10, including four investment professionals, has set aside $4 million in capital to fund its business for at least two years, Sachdeva said.

“I’m lucky that my previous startup was relatively successful and was profitable for me, so I’m reinvesting some of those profits and starting an organization like this upfront, as opposed to building it out at a later stage,” he said.

Investors are likely to put money into Flowering Tree’s hedge fund from the end of the year, he added. The hedge fund, which targets average annual returns of “mid-teens to high- teens” over five years, has the capacity to grow to $1 billion to $1.5 billion, he said.

From  Bloomberg

Jean Viry-Babel
senior partner
VBK partners

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