Hutchin Hill Plans to Close Hong Kong Office After 19 Monthsby , , and
Pan-Asian strategy didn’t meet firm’s performance criteria
Hutchin to focus on U.S. opportunities, according to letter
Hutchin Hill Capital, the $3.4 billion New York-based hedge fund led by Neil Chriss, is shutting its 19-month-old Hong Kong office.
While the fund’s Pan-Asian Event Driven strategy has been “modestly profitable” since its inception, profits were driven “largely by its syndicate activities and the core Event book has not met our performance criteria,” according to a letter sent to investors Monday. Hutchin Hill will focus instead on opportunities in the U.S.
The majority of the portfolio has already been liquidated, and the remainder will be sold in the coming weeks, according to the letter. The Hong Kong office will be closed at the end of the year with the winding down of its only Asia-based investment strategy, according to the document. The firm declined to comment.
The $2.9 trillion global hedge fund industry is facing lagging returns, investor redemptions and pressure on fees, which is forcing managers to streamline operations and refocus on core businesses. Tudor Investment Corp., the firm founded by billionaire Paul Tudor Jones, closed its Singapore trading desk amid investor withdrawals, Bloomberg reported last month. Dinakar Singh’s TPG-Axon Capital Management is closing its Hong Kong office and is withdrawing from Tokyo as assets plummeted, Reuters reported in September.
Global hedge funds also scaled back Asian operations during and in the aftermath of the 2008 global financial crisis. Citadel, the hedge fund company founded by Kenneth Griffin, shut its Tokyo office and cut dozens of jobs in 2008. Ramius LLC, a New York-based firm once overseeing $11 billion, London’s GSA Capital Partners LLP and Concordia Advisors LLC also cut jobs and offices in Asia to reduce costs that year.
Hutchin Hill opened its first Asia office in Hong Kong in March 2015 with 10 employees. Aaron Nieman, a former manager at SAC Capital Advisors who joined Hutchin Hill to lead the pan-Asia event-driven strategy, split his time between New York and Hong Kong.
“We thank Aaron Nieman and his team and wish them the best in their future endeavors," the letter said.
Nieman led a team, including Hutchin Hill colleague Kevin Cho, in a 2008 attempt to start an Asia-focused event-driven hedge fund for Blackstone Group LP. The plan was cancelled the following year following Blackstone’s review of the market environment after the financial crisis and its strategic priorities globally.
Asia-focused hedge funds on average are on track to trail global hedge funds for the first year in five. They returned an average 1.1 percent in the first nine months, a third of the advance of the global hedge fund index compiled by Singapore-based data provider Eurekahedge. In Asia, where managers have been frustrated by a dearth of corporate events such as mergers and reorganizations that they can invest in, funds focused on the strategy lost 0.8 percent in the first three quarters, dwarfed by the 7.2 percent surge in the global event-driven fund index, according to preliminary data from Eurekahedge.
Separately, Hutchin Hill’s letter also said that the firm hired Richard Mazzella, the former chief operating officer for global fixed income at Citadel LLC, as a partner to oversee portfolio manager recruitment initiatives, as well as to help monitor existing managers.
Hutchin Hill returned 2.3 percent in its Diversified Alpha Master Fund this year through Oct. 7, according to a person with knowledge of the matter. The firm invests across markets and is composed of teams that trade different strategies. The fund started trading in July 2008 with $300 million from billionaire James Simons, founder of Renaissance Technologies.