Hedge Funds in Asia Had Nowhere to Hide in January ‘Bloodbath’by and
Asian hedge funds had worst start to a year since 2008
Quam Asset, Golden China hedge funds among those with declines
Hedge funds in Asia, which navigated turbulent markets to post gains in 2015, had nowhere to hide in January.
As global stocks, currencies, commodities and risky bonds were roiled in a renewed frenzy of selling in January, hedge funds including those from Quam Asset Management Ltd. and Greenwoods Asset Management Ltd. fell more than 10 percent last month, while one from Springs Capital fell more than 20 percent. As a group, Asia-focused hedge funds declined 3.1 percent, their worst start to a year since 2008, according to Singapore-based Eurekahedge Pte. About 81 percent of hedge funds actively reporting to the Asia Long-Short Equities category had negative returns last month, the data show.
"January was a bloodbath to the whole world,” Chris Choy, chief investment officer for the Quam China Focus Segregated Portfolio, said in an e-mail. Unless one had a “crystal ball,” it was very difficult to avoid losses, said Choy, whose $126 million Quam China Focus fund fell 16.7 percent in January.
Hedge funds in Asia averted losses last year even as high-profile counterparts in other parts of the world were stymied amid volatile markets. That’s proving to be a challenge so far this year, as fears about a global slowdown and a further decline in oil prices spurred an investor flight to safety. The selloff wiped out more than $7 trillion in stock market value worldwide, with the Shanghai Composite Index declining 23 percent in January and the Standard & Poor’s 500 Index sliding 5.1 percent. Oil prices slumped to a 12-year low near $26 a barrel last month and losses in high-yield bonds deepened following a drop last year.
January was "exceptional in terms of the speed and ferocity of the declines in many markets and was in some ways reminiscent of early 2009 in the urgency of the selling," Geoffrey Barker, who manages the Counterpoint Asian Macro Fund, wrote in an investor letter.
The Counterpoint fund, which managed $109 million as of Feb. 1, declined 3.2 percent in January, according to the letter. Barker, a former HSBC Holdings Plc economist who manages the fund with City Financial Investment Company (Hong Kong), wrote that wrong-way bets on stocks hurt the fund and reverting to bearish wagers backfired after a rally following the unexpected cutting of interest rates by the Bank of Japan. Long positions in zinc, nickel, copper and rubber also detracted from performance.
Springs China Opportunities Fund lost nearly 24 percent in January, according to an estimate sent to investors, as the Shanghai gauge declined. The fund started in September 2007, when the index was trading at nearly twice its current value, and has generated a nearly 19 percent annualized return through the end of last year.
Springs is one of the few hedge funds managed outside China that focuses on the country’s domestic stock market. Domestic class-A shares, which plunged more sharply in January than Hong Kong and U.S.-listed Chinese shares, account for about 80 percent of investments and the stock picker uses little borrowing to enhance returns, said a person with knowledge of the matter. Springs told investors that the January selloff was largely triggered by the index circuit breaker which has since been scrapped and that it sees many opportunities among A-shares, said the person, who asked not to be identified as the fund is private.
Greenwoods Asset Management’s Golden China fund, which manages more than $1.7 billion, lost 11 percent in January, according to data compiled by Bloomberg. The fund, led by George Jiang, was among the top performers in 2015. Jiang and Joseph Zeng, a partner at Greenwoods, said in an e-mail that the market volatility has given the firm plenty of investment opportunities.
Buying on Dips
“We would rather see a year started with a big correction for fundamental investors to buy on dips, rather than a year started with a big rally at the beginning and then tumbled,” Zeng said in the e-mail.
Wykeham Capital’s Asia Value Fund dropped 9.2 percent in January, said Howel Thomas, the firm’s Hong Kong-based portfolio manager. The fund gained 20 percent in 2015, bringing its annualized returns to 21 percent since its April 2009 inception, he said. This month, the fund has gained 5.3 percent though Feb. 16, paring its year-to-date decline to 4.3 percent, Thomas said. The fund, which focuses on small-cap stocks listed in Hong Kong, received allocations from two new investors at the end of December, bringing its assets under management to $25 million.
The FengHe Asia Fund, managed by F&H Fund Management Pte., fell 3.8 percent in January, with tumbling A-shares hurting performance, according to Rebecca Walters, the firm’s chief operating officer. John Wu, who was the 19th person hired by Alibaba Group Holding Ltd., started Singapore-based F&H Fund Management in 2010 with Matt Hu, a former portfolio manager at China Securities Ltd. and co-founder of Taifook Century Asset Management. FengHe Asia gained 24 percent in 2015.
Some funds managed to eke out gains. The Athos Asia Event Driven Fund, which had about $146 million as of the end of last month, rose 0.08 percent in January, according to a letter to investors. The fund, led by Chief Investment Officer Matthew Moskey and Fred Schulte-Hillen, returned 9.6 percent on an annualized basis from its inception in April 2012 through the end of December.
Hedge funds investing in Japan, which as a group rose in 2015, were also not immune to losses in January as the nation’s stocks tumbled along with those in the rest of the world. As a group, Japan-focused hedge funds declined 2.1 percent in January, according to data from Eurekahedge.
Asuka Asset Management Co.’s three hedge funds are all in the red so far this year, according to Mariko Seki, who works in the $275 million firm’s investor relations department. Asuka Japanese Equity Long Short Strategy fell 6.1 percent in January and Asuka Opportunities Strategy dropped 3.2 percent, Seki said. Toshihiro Hirao is the portfolio manager for both funds. Asuka Value Up Strategy, the firm’s small- and mid-cap focused activist fund managed by Yosuke Mitsusada, declined 3.4 percent.