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Fortunes Reverse for Hedge Funds That Won in Past Selloffs

  • Hao's China hedge fund lost 6.1% after last year's 149% gain
  • TAL China Focus Fund lost 8.4% in first two months of 2016

Asia-based hedge funds that navigated market turbulence in the past are struggling with the ferocity of this year’s carnage.

Hao Advisors Management’s $328 million Greater China Focus Fund, which surged 149 percent last year amid a stock rout in Asia’s biggest economy, lost 6.1 percent in the first two months of the year, according to a document obtained by Bloomberg News. Trivest Advisors’ $622 million TAL China Focus Fund, which hasn’t posted a single losing year, lost 8.4 percent in the first two months of 2016, according to a document.

Violent market swings this year have spelled a reversal of fortunes for hedge funds in Asia, which as a group managed to post gains in 2015 even as peers in the U.S. and Europe stumbled. This year, they’ve been stymied by a global selloff spurred by weak oil prices, concerns about U.S. interest rate increases as well as uncertainties about the Chinese economy. Asian hedge funds plunged on average 5.6 percent in the first two months in the worst start to the year on record, according to Singapore-based data provider Eurekahedge Pte.

‘More Variables’

"The general trend in the hedge fund industry is that there is a smaller percentage of funds that can get it right consistently," said Alex Mearns, Eurekahedge’s chief executive officer. "The economic environment is not determined by fundamentals anymore. There are more variables coming into play which do make it harder to navigate.”

About 75 percent of Asia-focused hedge funds lost money this year through February, as did 92 percent of funds focused on Greater China, according to Eurekahedge data.

Managers investing in Asia have had no respite in 2016 as markets across the region have tumbled. The Shanghai Composite Index is among the world’s worst-performing major benchmarks this year after sliding almost 18 percent, while the MSCI China Index is down 7.2 percent.

There are some exceptions to the widespread losses. Triada Capital’s Asia credit long-short hedge fund gained 4.5 percent this year. The Hong Kong-based firm was co-founded by three women who previously worked at London-based hedge fund CQS Management and Deutsche Bank AG.

Trivest, Hao

Trivest, the Hong Kong-based firm that oversees nearly $902 million of assets, has made an annualized 11 percent for investors since inception in July 2010 and had no previous annual loss, even amid turbulent markets that saw the MSCI China Index tumble 20 percent in 2011 and 10 percent last year.

The firm is led by Wu Huimin, a founding partner of Prime Capital Management, one of the oldest and largest China-focused hedge fund managers; Xue Lan, a former head of China research at Citigroup Inc.; and Sun Lu, a former executive director at Indus Capital Advisors, according to the document.

Hao Advisors’ fund, which bets on rising and falling stocks, is led by Chief Investment Officer Zhang Hao, who previously worked at Prime Capital. The fund has posted annualized returns of 89 percent for investors since its inception in August 2014, according to the document.

The market turmoil also led to a 5.7 percent loss at Parametrica Global Fund, which uses computer models to bet on rising and falling stocks, in the same two months. It had made money every calendar year since January 2009, translating into a nearly 15 percent return on an annualized basis as of February, according to the document.

Parametrica Asset Management, a Hong Kong-based firm overseeing $472 million at the end of February, was spun off from Millennium Partners and is led by Ju Xiongwei, a former senior fund manager at the New York-based hedge fund led by Izzy Englander. Parametrica is starting an Asia-focused pool early next month, according to the document.

The documents obtained by Bloomberg News didn’t provide further details on the funds’ returns for this year.

Trivest’s Wu and Xue didn’t reply to e-mails seeking comment. Eva Feng, Hao’s Hong Kong-based chief operating officer, declined to comment on the numbers as the information is private, as did Gabriel Ng, head of finance, risk and compliance at Parametrica.

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