Riley Paterson Investment Management Pte, which generated a 21 percent return in the global industry’s worst year, decided to shut its only hedge fund because assets are expected to decline to a 10th of its peak.
“Assets under management looked as though they were going to $30 million by June this year as we fell below institutional size,” Singapore-based Co-founder Daren Riley said in an e-mailed reply to Bloomberg today. “We feel it’s better to return the money to investors than being forced to cut resources employed below the high standard all our investors deserve.”
Riley Paterson Asian Opportunities Fund’s assets fell to $47.9 million by the end of March, after peaking at $335 million at the end of January 2010, according to data compiled by Bloomberg and confirmed by Riley. He added that it became difficult to raise money in a “bear market or if you have bearish views.”
An estimated 775 hedge funds closed down last year, 4 percent more than 2010 as institutional investors directed most of the new capital toward the largest managers, according to Chicago-based data provider Hedge Fund Research Inc.
Investors added $18.3 billion of new capital to managers with at least $5 billion of assets in the first quarter, according to HFR data. Smaller managers with assets below that threshold suffered a combined outflow of nearly $2 billion.
Betting on Stocks
Riley Paterson was co-founded by Stewart Paterson, a former chief Asia equity strategist at Credit Suisse Group AG, and Riley, a former head of equity sales in Asia outside of Japan at ING Groep NV.
The fund, set up about four months before Asian stocks peaked in 2007, returned 21 percent the following year, the second-highest return among equity long-short funds focused on non-Japan Asia, according to Singapore-based Eurekahedge Pte.
The HFRI Fund-Weighted Composite Index dropped 19 percent in 2008 as the global financial crisis plunged global hedge funds into their worst annual return since Chicago-based Hedge Fund Research Inc. started to track data in 1990.
Riley Paterson stopped accepting money from new investors into the fund in January 2010 after assets swelled beyond the $300 million it targeted when it was started, Riley said.
The Riley Paterson fund advanced 14 percent in 2009 and 8 percent last year. Its only losing year was 2010 when net assets value dropped 7 percent, according to Bloomberg data.
Riley Paterson is focused on ensuring every investor has all their money back, Riley said in the e-mail. Only after completing the process will the team consider future plans, he added.
“Asian equities are below levels we started the fund at almost five years ago,” Riley said, whose firm analyzed macroeconomic cycles before wagering on the market. “We believe the strategy we have been running, perhaps with greater ability to hedge external global risks, is one we continue to believe in and, with stronger long-term commitments from institutions, could be launched in the future.”