March 26 (Bloomberg) -- Value Partners Group Ltd., Asia's second-largest hedge fund manager, said 2007 profit surged 66 percent on growing assets.

Profit reached HK$1.42 billion ($183 million) from HK$856.3 million a year earlier, the Hong Kong-based company said in a filing to the city's stock exchange.

Value Partners' results announcement, its first as a publicly traded company, came as $195 billion of asset writedowns and credit costs linked to U.S. mortgage markets raise the risk of a global economic slowdown, bringing a five-year bull market to an end.

Hong Kong's Hang Seng Index has slumped 19.2 percent so far this year, headed for the worst quarterly decline since September 2001, according to data compiled by Bloomberg. The index has shed 29 percent of its value since its Oct. 30, 2007 peak.

The drops haven't spared Value Partners, which describes itself as a ``value investor'' known for picking smaller companies it says are underpriced compared with their value derived from fundamental analyses.

``The value stocks in most emerging markets have been going nowhere,'' said Peter Douglas, principal of GFIA Pte Ltd., a Singapore-based firm that provides research and allocates capital to Asian and Latin American hedge funds.

Value Partners invested 88 percent of its total assets under management at the end of June 2007 in Greater China, according to a JPMorgan Chase & Co. report in October.

Falling Stock Markets

The asset manager's Hong Kong-traded shares lost 39 percent since its IPO in November, on concern that falling stocks will dent returns of funds and damp fees it charges.

Stock and credit market drops along with rising leverage costs led the Eurekahedge global hedge fund index down 2.6 percent in January, the worst monthly return in the eight-year life of the index compiled by the Singapore-based company.

At least a dozen hedge funds worldwide, including Peloton Partners LLP, have needed fresh capital or been forced to liquidate this year because they couldn't meet bank demands for more collateral.

Tokyo-based Sparx Group Co., ranked by Alpha magazine as Asia's largest hedge fund manager by assets under management at the end of March last year, in February posted a 10 percent drop in profit for the nine months ended December 2007.

Value Partners' assets under management grew to $6.2 billion at the end of January, from $5.7 billion in June 2007. They were $6.5 billion as of Feb. 29.

The company will pay a total dividend of 35.5 Hong Kong cents.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net.

Last Updated: March 25, 2008 12:16 EDT