Singapore Hedge Fund

Alternative asset management in Singapore

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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Blackstone Cancels Plan for Asian Event-Driven Fund

May 15 (Bloomberg) — Blackstone Group LP, the world’s biggest buyout company, canceled a plan to start a hedge fund that initially aimed to invest as much as $1 billion in Asian companies affected by events such as mergers and reorganizations.

Blackstone decided not to proceed with the Asian event- driven fund “after a review of the market environment and our strategic priorities globally,” New York-based Blackstone spokesman Peter Rose said in an e-mail. The fund was to be managed by Blackstone A.M.N. Advisors.

Most of about 17 A.M.N. team members, including Chief Investment Officer Aaron Nieman, left after the March decision, said four people familiar with the matter, declining to be identified because the information isn’t public. The rest have been transferred to other Blackstone departments, they said. Rose declined to comment on specific personnel.

Global hedge fund assets slumped 31 percent by March from a mid-2008 peak as a result of the worst average annual return and record investor redemptions, according to Chicago-based Hedge Fund Research Inc. The number of hedge funds and funds of hedge funds fell for the first time in at least 19 years in 2008, the research firm’s data showed.

“Capital raising in these tight times, especially for funds with longer lockups, is very, very tough no matter how big you are and how good your story is,” said Paul Smith, a Hong Kong-based director at Triple A Partners Ltd., which provides startup capital to hedge funds. “Investors want transparency and liquidity and these are hard to provide in an event-driven fund.”

Scaling Back

New York-based Blackstone has been scaling back its hedge fund operations in the region, joining peers such as Citadel Investment Group LLC and Och-Ziff Capital Management Group LLC to focus on their biggest markets. Blackstone’s GSO Capital Partners LP unit, a manager of credit hedge funds, shut down its Asia investment desk less than four months after its opening in September, people familiar with the matter said in January.

“In this market environment where both capital and people are constrained, it is especially important to be disciplined in where you allocate resources to achieve the greatest return,” Rose said in the e-mail. GSO decided to withdraw from Asia to concentrate in Europe and U.S., where it saw greater opportunities in the short- and medium-term, he added.

Hedge Fund Push

Blackstone Chairman Stephen Schwarzman has pushed the firm he founded with Peter G. Peterson in 1985 deeper into hedge funds and merger advice to offset the decline in private-equity deals.

Blackstone announced the hiring of Nieman in May last year to start what was then named Blackstone Altius Advisors. The unit, later renamed A.M.N., planned to start its first Asia- focused event-driven fund on Oct. 1.

A.M.N. targeted as much as $1 billion for the fund, including $150 million committed by Blackstone and its employees over the first three months, said documents sent to investors in September.

The plan was delayed and the fundraising target reduced after the market downturn made it harder for hedge funds to raise money.

Funds seeking to profit from “corporate stress and balance sheet dysfunction” may indeed find better opportunities in U.S. and Europe, said Peter Douglas, principal of Singapore-based hedge fund consulting firm GFIA Pte. “Asia is, relative to the developed world, in much better shape.”

Asian event-driven investments may become more profitable later this and next year with rising corporate defaults, bankruptcies and reorganizations, Triple A’s Smith said.

Fewer New Funds

Globally, hedge fund starts dropped to 659 last year, the slowest since 2000, HFR said. By contrast, hedge fund liquidations jumped more than 73 percent to 1,471 in 2008 over a year earlier. Investors pulled a record $155 billion out of the industry last year and another $103 billion in the first quarter, HFR data showed.

In 2008, 75 new Asia-focused hedge funds raised a combined $3 billion, or $40 million each on average, according to London- based publication HedgeFund Intelligence. A year earlier, 116 such funds brought in $7.8 billion, or $67.5 million each.

Nieman and Kevin Cho, an A.M.N. senior analyst, are rejoining former employer SAC Capital Advisors LP in its Sigma Capital Management unit, said Jonathan Gasthalter, a New York- based spokesman for the hedge fund manager founded by billionaire Stephen Cohen.

Nieman was a portfolio manager and managing director at SAC, having built its first Asia-Pacific-focused event-driven fund, before leaving to join Blackstone, said the A.M.N. documents.

From Bloomberg

Jean Viry-Babel
senior partner
VBK partners

Filed under: general, , , , , , , , , , , ,