Highbridge Said to Seek $250 Million for New Asia Hedge Fund

Highbridge Capital Management LLC, the JPMorgan Chase & Co. unit that manages about $31 billion, is starting an Asia hedge fund, returning to the market more than two years after shutting a predecessor fund.

Highbridge plans to raise about $250 million for the Pan Asia Multistrategy fund when it opens to investors in early 2014, said two people with knowledge of the matter, asking not to be identified because the information is private. The fund is led by 32-year-old Asia head Arjun Menon, who is based in Hong Kong, according to a document seen by Bloomberg News. Queenie Tsao, a spokeswoman for Highbridge at RLM Finsbury Ltd. in the city, declined to comment on the plan, citing legal restrictions.

The firm liquidated the about $1.5 billion Asia Opportunities Fund after former Asia head Carl Huttenlocher left in March 2011 to start his own hedge-fund company, Myriad Capital Management Ltd. The new Asia fund will focus on exploiting pricing gaps between related securities, taking less risk than its predecessor, the people said.

The money Highbridge allocated in Asia to this investment approach, known as arbitrage, returned 25 percent between February 2011 and September this year, said one of the people. The performance is being used to market the new fund, which is overseen by a six-member investment team led by Menon, according to the person. That compares with the 12 percent return by the Eurekahedge Asian Hedge Fund Index in the same time period.

Investor Demand

The new fund is opening amid an increase in investor demand for experienced hedge-fund personnel after the 2008 global financial crisis. About 43 percent of institutions would not invest with managers with less than two years’ track record, an annual Deutsche Bank AG survey in February showed.

“Coming from an established fund helps, but without a track record it will make it impossible to raise capital,” said Will Tan, a Singapore-based recruiter at Principle Partners Pte. “There are less than 10 guys in Asia who can lead a team similar to the one at Highbridge and most of them are with international funds or running their own.”

Menon’s team has been running the new Asia fund with only New York-based Highbridge’s allocation since May before opening the fund to outside investors, said the people. They will continue to manage regional investments for Highbridge’s global fund, they added.

Fund Strategies

The fund will use strategies including credit and convertible arbitrage, equity long-short and capital structure relative value. The team will be able to allocate assets to the best opportunities across geographies and asset classes, according to the document.

Equity long-short funds bet on rising and falling stocks. Capital structure managers seek to profit from the pricing disparities between securities issued by the same companies. Convertible arbitrage funds typically buy the convertible bonds and sell borrowed common stock of the same issue.

Menon, who is responsible for Highbridge’s Asian convertible, derivatives and credit investments, has been with Highbridge since 2003 and moved to Hong Kong in 2006, according to an official biography in the document. He co-headed the Asian business after Huttenlocher’s departure and was made sole head in December 2011, two people said then.

Menon’s trading experience in Asia, including weathering the global financial crisis in 2008, will help raising money, said Stephane Pizzo, managing partner at Singapore-based investment adviser Lotus Peak Capital Pte. For investors focusing on market experience and risk management, “it’s very positive the fund is starting small,” he added.

Highbridge has operated in Asia since opening a Tokyo office in 1994.

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