Hedge funds in Asia slump in January ‘bloodbath’

HONG KONG — Hedge funds in Asia, which navigated turbulent markets to post gains in 2015, had nowhere to hide last month.

As global stocks, currencies, commodities and risky bonds were roiled in a renewed frenzy of selling last month, hedge funds including those from Quam Asset Management and Greenwoods Asset Management fell more than 10 per cent, while one from Springs Capital fell more than 20 per cent. As a group, Asia-focused hedge funds declined 3.1 per cent, their worst start to a year since 2008, according to Singapore-based Eurekahedge. About 81 per cent of hedge funds actively reporting to the Asia Long-Short Equities category had negative returns last month, showed the data.

“January was a bloodbath to the whole world,” Mr 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 Mr Choy, whose US$126 million (S$177 million) Quam China Focus fund fell 16.7 per cent last month.

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 is proving to be a challenge 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 US$7 trillion in stock market value globally, with the Shanghai Composite Index declining 23 per cent last month and the Standard & Poor’s 500 Index sliding 5.1 per cent. Oil prices slumped to a 12-year low near US$26 a barrel last month and losses in high-yield bonds deepened after 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”, Mr Geoffrey Barker, who manages the Counterpoint Asian Macro Fund, wrote in an investor letter.

The Counterpoint fund, which managed US$109 million at Feb 1, declined 3.2 per cent last month, according to the letter. Mr Barker, a former HSBC Holdings 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 per cent last month, 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 per cent annualised return through the end of last year.

Class-A Focus

Springs is one of the few hedge funds managed outside China that focuses on its domestic stock market. Domestic class-A shares, which plunged more sharply last month than Hong Kong and United States-listed Chinese shares, account for about 80 per cent of investments, and the stock picker uses little borrowing to enhance returns, said a person with knowledge of the matter.

Springs told investors last month’s 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 US$1.7 billion, lost 11 per cent last month, according to data compiled by Bloomberg. The fund, led by George Jiang, was among the top performers in 2015. BLOOMBERG