Piquant Capital Closes Fund After Failing to Draw Investors

Updated on
  • The $20 million Singapore quant fund stopped trading in June
  • Fund made loss in 2014, flat this year until end of operations

Piquant Capital Pte is shutting its quantitative hedge fund as it failed to attract investor money after making a loss in 2014, the firm’s chief investment officer said.

The Singapore-based money manager didn’t reach its targeted $60 million and will officially end operations at the end of the year, George Varghese said in an interview this week. He said he stopped trading in June when the fund’s assets under management were at $20 million. The fund lost 4 percent in 2014 and was flat this year until ceasing operations, he said.

More of Asia’s smaller hedge funds are closing as volatile markets dent returns, tighter regulations increase costs and institutional investors entrust their money to bigger funds. From the beginning of 2013 through November this year, 235 Asian funds with assets of less than $50 million ended operations, according to data provider Eurekahedge Pte. That compares with only four with assets of more than $500 million.

"Once you get below that super league, life is very difficult indeed," said Peter Douglas, Singapore-based principal at CAIA Association, a global group for alternative investment education. "A hedge fund under the $50 million mark is not a viable business model, period. I can see no circumstances where it works. At that level, you’re not going to get the attention of any serious allocators."

Big Disadvantage

Hedge funds have been whipsawed this year by rising global volatility, losing money as a group for four straight months through September, before rebounding in October and November. The global Eurekahedge Hedge Fund Index rose 2.3 percent this year through November.

Smaller hedge funds are especially at a disadvantage in a market that has even the largest and most high-profile managers reevaluating whether they want to be in the business. Michael Platt’s $8 billion BlueCrest Capital Management, which is based in the Channel Island of Jersey, will return all client money by early next year and focus on managing internal money, citing declining fees and rising costs of running a hedge fund.

Varghese said that his fund didn’t reach the assets under management needed to attract the interest of institutional investors like pension funds or sovereign wealth funds. “For a smaller fund, it’s hard to raise assets,” he said. “And it takes a couple of years to reach the size where institutional investors allocate money to you.”

The Piquant Ena fund was started in October 2011, and returned 11 percent and 5 percent in the two following years, according to Varghese.

(Updates with industry returns in fifth paragraph.)
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