PCA Said to Shut Down Hedge Fund After CIC Withdraws Backing

PCA Investments decided to shut a multistrategy hedge fund after China’s sovereign wealth fund, its only major outside investor, indicated it would pull its money, said two people familiar with the matter.

PCA also closed its Hong Kong office that was focused on Asian stock investments, cutting at least five jobs, said the people who asked not to be identified because the information is private. The fate of its office and employees in Beijing, where founder Hu Hang sits, is not immediately clear.

Hu, who started the fund in the second half of 2011 with about $500 million from China Investment Corp., also known as CIC, did not reply to e-mails and phone messages seeking comment. The decision was based on commercial and financial purposes and conducted in accordance with market principles, a person close to the $575 billion Beijing-based sovereign wealth fund said.

The Wall Street Journal reported the closure yesterday.

PCA was the only hedge fund startup known to have received backing from CIC and one of the largest set up in Asia after the 2008 global financial crisis. CIC has invested in more established hedge funds, including London-based Capula Investment Management LP. and funds of hedge funds run by the Blackstone Group LP and Morgan Stanley, WSJ reported in 2009.

Made Money

PCA’s fund has made money since inception, said the people. CIC is withdrawing its capital because of a strategy change, they added. PCA’s stock investments generated double-digit returns in each of the last two years, one of the people said.

Hu worked at Purchase, New York-based Platinum Grove Asset Management LP, the hedge fund co-founded by Myron Scholes, before setting up PCA.

Scholes won the Nobel Prize for economics in 1997 alongside Robert Merton for their Black-Scholes option pricing model. He was also a partner of Long-Term Capital Management, the hedge fund that collapsed in 1998.

PCA also had global fixed income and global macro investments in addition to pan-Asian equities, according to its website.

Fund managers Lin Xiao, Eng Khan Seet and trader Jon Coombs were among Hong Kong employees let go by PCA last week, said the people.

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