August Rout Means 32% of Chinese Hedge Funds Losing Money

  • Percentage of China-focused funds in the red more than doubled
  • Three straight months of losses cut industry returns to 2.3%

China’s equity-market slump is claiming more hedge-fund victims.

The percentage of Greater China-focused hedge funds suffering losses this year more than doubled to 32 percent at the end of August, according to data compiled by Eurekahedge Pte. That compares with just below 13 percent at the end of July, according to the Singapore-based data provider. Funds run by long-established firms including Pinpoint Asset Management and Greenwoods Asset Management were among those that saw a reversal of fortune in August, before rebounding this month.

China hedge funds that led global peers in performance earlier in the year are feeling the sting after a stock rout induced by worries about a slowdown of the world’s second-largest economy and unwinding of excessive stock market borrowings. Three consecutive months of losses have hurt the average performance of such funds, which returned 26 percent in the first five months of the year.

Funds Decline

The Eurekahedge Greater China Hedge Fund Index declined 7.1 percent last month, cutting this year’s gain to 2.3 percent, after most of the 79 funds it tracks reported August numbers. Average industry losses could be higher, especially if newer entrants didn’t report their returns to the data provider.

Some of the biggest and oldest China-focused hedge-fund managers were caught in the latest maelstrom after surviving the 2008 global financial and the 2011 European sovereign debt crises.

Greenwoods China Alpha Fund, which had just over $1 billion of assets at the end of June, declined 15 percent in August, taking its loss for the first eight months of the year to 6.9 percent, according to data compiled by Bloomberg. The fund had gained 37 percent in the first five months. Opened in January 2010, it had one annual loss in 2011.

The company’s $1.8 billion, less-leveraged Greenwoods Golden China Fund returned 6.8 percent in the year through August. It lost money in two calendar years after trading started in 2004.

There have been signs of improving returns this month. The Greenwoods Alpha Fund climbed an estimated 3.8 percent this month through Sept. 18, according to a person familiar with the matter, who asked not be identified because the returns are private.

Pinpoint China

The $539 million Pinpoint China Fund declined 3.3 percent in August, and lost 1.6 percent in the first eight months, according to data compiled by Bloomberg. It reported the only annual loss in its 10-year history in 2008.

The Pinpoint China Fund also rebounded in the first few weeks of September. The fund climbed an estimated 2.5 percent this month through Sept. 18, and is back in positive territory with an 0.8 percent gain, according to Rachel Guan, a Hong Kong-based executive director at Pinpoint. The Pinpoint Multi-strategy Fund, a smaller pool, returned 12 percent this year through Sept. 18.

The LBN China+ Opportunity Fund dropped 11.6 percent in August to wipe out its gain for the first eight months of the year, according to an e-mailed update from the Hong Kong-based manager of $700 million of assets in long-only and hedge funds. The fund had $165 million of assets, data compiled by Bloomberg show.

The Legends China Fund plummeted almost 21 percent in August, taking this year’s loss to 9.2 percent, after surging nearly 60 percent in the first five months, the data show. It had about $90 million of assets in August.

Value Partners

The $58 million Value Partners Hedge Fund slid 2.1 percent for a 1.1 percent decline this year, according to data compiled by Bloomberg.

Hong Kong-based spokespeople from Greenwoods, Legends and LBN declined to comment while Value Partners and Pinpoint confirmed the numbers.

Some funds, especially those with a broader Asia focus, bucked the trend. The $157 million Counterpoint Asian Macro Fund, led by former HSBC Holdings Plc economist Geoffrey Barker, rose 6.4 percent in its best month, narrowing this year’s loss to 0.8 percent, according to a newsletter sent to investors. It profited from bets against stocks, including South Korea’s Kospi index. It also gained from wagers on the Japanese yen to strengthen against the dollar and the Australian dollar, according to the document.

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