Asian hedge funds make worst start to any year

SINGAPORE — Hedge funds in Asia, which beat counterparts in the United States and Europe in 2015, are off to their worst annual start on record this year, as the region’s stock markets have plunged amid a dimming outlook for growth.

Asia hedge funds, excluding those that invest in Japan, fell 1.5 per cent in February, bringing their loss for the first two months of 2016 to 6.6 per cent, according to Singapore-based data provider Eurekahedge. Apart from being the biggest drop ever for the first two months of the year, that is also the worst start among the world’s major regions, said Eurekahedge. Hedge funds including those from Greenwoods Asset Management and Zeal Asset Management extended declines they suffered in January.

After successfully navigating turbulent markets in 2015, hedge funds in Asia are seeing a reversal this year as worries about a global slowdown have deepened. The Shanghai Composite Index has tumbled 19 per cent this year to rank among the worst-performing equity markets in the world, and most of the region’s benchmarks have been whipsawed by volatility amid scant signs of global growth.

“Hedge-fund managers in the region, especially those focusing on long-short strategies, had been stung by volatility in underlying markets,” said Mr Mohammad Hassan, a Singapore-based senior analyst at Eurekahedge.

As it becomes more difficult to post consistent returns, investors are increasingly shifting their money to the largest or most promising managers, prompting many smaller-scale firms to exit the business or return money to investors. That is creating a bifurcation in Asia’s hedge-fund industry.

The losses for hedge funds investing in Asia ex-Japan compare with a decline of 3.2 per cent in Europe through the end of February and a decrease of 1.7 per cent in North America, according to the Eurekahedge website. Last year, Asia ex-Japan hedge funds rose 7.5 per cent, beating rivals in other parts of the world.

Greenwoods Asset’s Golden China Fund fell 3.7 per cent in February, bringing its losses to 14.4 per cent so far this year, according to Mr Joseph Zeng, a Hong Kong-based partner at the hedge fund firm. The fund, which managed US$1.7 billion (S$2.3 billion) as of January, was one of the top performers last year, posting gains of almost 22 per cent.

The Zeal China Fund fell an estimated 0.18 per cent in February and is down 1.6 per cent so far this year, according to Mr William Shek, head of marketing and investor relations at Hong Kong-based Zeal Asset Management. The US$220 million fund has returned an annualised 7.8 per cent since it began trading in July 2010.

Some funds managed to generate gains. Wykeham Capital’s Asia fund, which focuses on small-cap stocks listed in Hong Kong, rose 8.2 per cent in February, a rare outlier among hedge funds in Asia last month. That pared the Wykeham Capital Asia Value Fund’s loss to 1.7 per cent so far this year, said Mr Howel Thomas, the fund’s Hong Kong-based portfolio manager, who started the firm in 2010.

Quam Asset Management’s China-focused fund gained 2.3 per cent in February, recouping some of the losses suffered in January, according to Mr Chris Choy, chief investment officer at the Hong Kong-based hedge fund. Last month’s gain brings the fund’s losses to 14.8 per cent so far this year, said Mr Choy. The fund managed US$126 million as of December. BLOOMBERG