Protege-Backed Expedition Shuts Asia Volatility Fund After Loss

Expedition Advisors Ltd., backed by New York-based Protege Partners LP, is returning investor capital in its Asia volatility hedge fund after losses.

Expedition’s hedge fund, which sought to profit from stock swings in Asia outside of Japan, lost 14 percent since its May 2012 inception, according to its March newsletter, the last one sent out to investors and non-investors in the fund and obtained by Bloomberg News.

“A prolonged period of suppressed volatility combined with a low ’vol of vol’ environment created a very difficult backdrop for our core strategy,” Craig James, Hong Kong-based chief investment officer of Expedition, said in an e-mailed statement. “Given the current climate, it was decided that money would be returned to our strategic investor.”

The company is closing the fund as central bank easings globally increased market liquidity and subdued stock swings. The Chicago Board Options Exchange Volatility Index averaged about 16 since May 1, 2012, one-fifth of the 80.9 reached on Nov. 20, 2008, when economic slowdown at the height of the global financial crisis threatened corporate profits. The index, known as VIX, measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index.

James declined to comment beyond the statement. Jay Suresh, who helped open Protege’s Singapore office in 2010, didn’t reply to an e-mail message from Bloomberg News seeking comment.

The fund had about $50 million at its inception, according to a person familiar with its assets.

Expedition’s is at least the second Asia volatility hedge fund to shut since last year. Sharp Peak Vega Feeder Fund, which invested in over-the-counter equity derivatives such as options and volatility swaps, closed after losing 18 percent between its October 2011 inception and June 2012, people with knowledge of the matter told Bloomberg News in October.

James headed Asia investment of AM Investment Partners LLC, a New York-based hedge fund set up by two former Deutsche Bank AG executives, before founding Expedition last year.

Before it's here, it's on the Bloomberg Terminal.