- Fund to trade Asian, emerging-markets securities from Nov. 30
- Three Stones to focus on relative value and volatility trading
Former Societe Generale SA traders led by Jong Beum Kim plan to start a new hedge fund that will employ several strategies seeking to profit from volatility in Asian markets and exploiting mispricing of related securities, according to people with knowledge of the matter.
The Three Stones Asian Multi-strategy Fund is scheduled to start trading on Nov. 30, said the people who asked not to be identified as the information is private. Kim, chief investment officer of Hong Kong-based Three Stones Capital, will manage it with Sebastien Cerbourg and Alexandre Avanian. All three worked for the French bank.
As global banks have dismantled or shrunk proprietary trading desks, former managers have struck out on their own in Asia, broadening an industry traditionally dominated by stock pickers who have struggled to manage volatile markets.
Three Stones will initially employ three trading strategies rarely seen among Asian hedge funds, according to the people. Capital structure arbitrage will allow it to take advantage of pricing discrepancies of different securities sold by the same companies. An option-based-trend-following strategy uses option theory to seek to profit from the trending behavior in equity markets, especially in Asia. Volatility trading will tap into swings in prices of securities as a result of imbalanced supply and demand or investor sentiment, said the people.
More trading strategies will be added when fund assets hit $500 million, they added.
Kim was a co-head of Asia-Pacific equities at Societe Generale between 2013 and 2014 and led regional proprietary trading earlier, the people said. Cerbourg was an Asia quantitative equity trader at the bank. Avanian co-headed Asia equities trading at the French bank as late as May. Nicholas Bloom, a former Asia chief operating officer of billionaire Ken Griffin’s Citadel, has taken the chief operating officer role at the new hedge fund.
Bloom could not immediately be reached for comment. Jerome Tam, a Hong Kong-based spokesman at Societe Generale, declined to comment on past employees.
Relative-value hedge funds globally returned almost 29 percent over the five years through the end of October, beating a gauge tracking peers of all strategies, according to data from Singapore-based Eurekahedge Pte. Their 1.6 percent gain in the first 10 months of this year compared with the almost 1.8 percent return of the broader Eurekahedge Hedge Fund Index.
Months like September presented challenges as investors dumped risky assets because of economic concerns and as securities moved in unison.
“Fears about a global recession grew, resulting in risk asset prices falling almost in lock-step around the world,” Anthony Lawler, a money manager at GAM Holding, which invests in hedge funds, said an Oct. 6 note. “That is a tough environment for investors to produce out-performance.”