Large Hong Kong Hedge Funds Have Best Year Since Inception

Photographer: Kiyoshi Ota/Bloomberg

A man looks at an electronic stock board displaying the closing figure of the Nikkei 225 Stock Average outside a securities firm in Tokyo on Jan. 14, 2014. The Nikkei 225 Stock Average surged 57 percent in 2013 as Prime Minister Shinzo Abe and the Bank of Japan introduced unprecedented stimulus to end 15 years of deflation. Close

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Photographer: Kiyoshi Ota/Bloomberg

A man looks at an electronic stock board displaying the closing figure of the Nikkei 225 Stock Average outside a securities firm in Tokyo on Jan. 14, 2014. The Nikkei 225 Stock Average surged 57 percent in 2013 as Prime Minister Shinzo Abe and the Bank of Japan introduced unprecedented stimulus to end 15 years of deflation.

Azentus Capital Management Ltd. and Myriad Asset Management Ltd., two of Hong Kong’s large hedge funds, had the best annual returns since inception, aided by Japan bets and investments outside of the region.

The Myriad Opportunities Master Fund, a $2.4 billion multistrategy fund, returned about 20 percent in 2013, said two people with knowledge of the performance. Azentus’s about $840 million Asia-focused global multistrategy fund rose 16.4 percent, said a person familiar with the return. The people asked not to be identified because the information is private.

The Nikkei 225 Stock Average (NKY) surged 57 percent in 2013 as Prime Minister Shinzo Abe and the Bank of Japan introduced unprecedented stimulus to end 15 years of deflation. The S&P 500 (SPX) Index rose almost 30 percent, triple the gain of the MSCI Asia-Pacific Index, amid signs of a recovering U.S. economy.

“Asian-based hedge funds ranging in size from $10 million to over $1 billion added significant value to investors,” said Ed Rogers, chief executive officer of Tokyo-based Rogers Investment Advisors. “We expect this process to repeat itself in 2014.”

The biggest 2013 profit contributor for Azentus, helmed by Morgan Sze, who once helped manage Goldman Sachs Group Inc.’s biggest proprietary trading team, was long and short trades in Japan, said the person. A short trade bets on securities’ prices falling.

Japan Bets

Investments in the country may have contributed to as much as half of Myriad’s profits during the 12 months, added one of the people. Myriad is led by Carl Huttenlocher, a former regional head of Highbridge Capital Management LLC.

Myriad’s Chief Operating Officer Scott Gaynor and Julie Chang, an investment relations officer with Azentus, declined to comment on the returns because such information is private.

The Eurekahedge Asia Hedge Fund Index gained 15.7 percent over the 12 months, the biggest annual advance in four years, as Japan funds benefited from the biggest single-year rally in the country’s stocks in 41 years and China managers beat the Hang Seng Index, according to the Singapore-based data provider.

Azentus also made money from Greater China as well as U.S. and European stocks influenced by Asian activities, said one of the people. Ability to profit from both undervalued and overvalued securities helped ease swings in monthly performances. Its worst monthly loss during the year was about 1 percent.

Outperforming Peers

The duo beat the Eurekahedge Asia Multi-strategy Hedge Fund Index, which returned 4.6 percent last year, according to preliminary data based on 56 percent of the 32 funds tracked reporting December numbers.

Last year’s profit brought Azentus above the high watermark, the historical peak net asset value above which it can charge performance fees, said the person. The fund lost about 6.8 percent in 2011 after it started trading in April that year. It returned about 1 percent in 2012, people with knowledge of the matter told Bloomberg News at the time.

Myriad, which started trading in December 2011, gained about 7 percent in 2012, two people with knowledge of the matter said in January last year.

Azentus managed as much as $2 billion in its first year.

Asian hedge funds as a whole outperformed their European peers’ 9 percent average return last year and 10 percent for their North American counterparts.

“Expectations are high for meaningful and continued inflows,” said Angharad Fitzwilliams, Hong Kong-based director in the hedge-fund capital group of Deutsche Bank AG. “The quality of Asian managers, their investment process and infrastructure have never been of a higher quality. We predict global allocators will continue to scale their exposure to Asia-Pacific funds.”

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

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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