By Aradhna Dayal
For those of us who
grew up listening to Whitney Houston’s soaring
vocals and spine-tingling renditions of her 1990s classic 'I
Will Always Love You’, her untimely demise this
month was a great shock.
For the fallen singer’s tragic story has every
element of a Hollywood classic: immense talent, a euphoric rise
to stardom, grappling with success, and finally a losing battle
with the dark side of fame and stardom.
The story of many an Asian hedge fund is not very
dissimilar. For those of us that have seen the
industry’s evolution since the 1990s, the
rollercoaster ride that Asian managers have gone through seems
all too familiar. Emergence of early hedge fund talent
– mostly in the chilly chimes of London or the US (and
sporadically in Tokyo or Hong Kong) in 1990s was followed by a
period of struggle and success as the Asian managers tried
establishing their identity on the global hedge fund scene (in
the early 2000s).
Then came the boom phase (between 2005 and 2007) when assets
in Asian hedge funds soared on the back of surging global
liquidity and a near-blind faith in any story Asian, much like
the steroids and drugs that seem to become pervasive in the
lives of talented but over-stressed celebrities. And when the
bubble burst in 2008-2009, there came a slow and painful
rehabilitation process, marred by painful withdrawal
The good news is that unlike Houston, many of these talented
Asian hedge fund managers have been able to rebuild their
businesses through a rethink on their investment strategies and
investor bases, and came out of the rehab stronger and more
institutionalised than ever.
But the bad news is that a large number of them have not
been able to survive the ordeal; latest AsiaHedge data show
that post the financial crisis, the closure rate in Asian hedge
funds continues to exceed the launch rate. At least 67 Asian
hedge funds closed down in 2011 as compared to the 58 new
launches seen last year.
And the recent shutdown trend seems to be accelerating.
AsiaHedge recorded at least six more closures in January 2012
alone, with many more in the wind-down process, including
high-profile newer funds such as Chris Hsu’s
Kilometre Capital, and from longstanding firms such as Boyer
Allan, Corevest, Tribridge and Thaddeus.
In many ways, Houston’s lyrics in her cult
song, bidding goodbye and a realisation that she is not what is
needed at this point, seem strangely prophetic.
Looking at it pragmatically, however, many of these
legendary hedge fund managers (much like Houston) have left
behind not just rich legacies, but also invaluable lessons.
Foremost among these, is that hubris – that tragic
flaw of overbearing pride that often sneaks into human psyche
– is best avoided. In today’s rapidly
changing and increasingly fragmented world, the managers who
succeed tend to be inclusive of people and divergent views
around them, and nimble enough to incorporate that in their
The trend also shows a marked change in investor attitudes:
investors today are a lot less forgiving, and more process
rather than relationships-driven when allocating to Asia, which
means that even longstanding funds face the risk of closure if
the performance is lukewarm over anything more than a
Most importantly, these star managers of yesteryear have
left deep inspirations for the new start-ups of today:
attributes such as simple, fundamental-driven, long-term
investing and a value approach – which is very much in
vogue again, albeit in conjunction with an overlay of the more
modern-day concepts of quant and macro.
A testament to that is the AsiaHedge’s New Fund
Survey, which features in the February issue of AsiaHedge. It
shows that despite dwindling numbers, new funds raised almost
$4.5 billion – the highest figure since the global
financial crisis — and a solid reason to bring cheer
in an otherwise uncertain environment.
In this issue of AsiaHedge, we also turn the spotlight on
event-driven, macro and multi-strategy funds —
strategies that have emerged as the most sought after in
Finally, the AsiaHedge Forum, which brings together the best
minds amongst Asian hedge funds, investors, policymakers and
thought leaders, will be held very soon (on 29 February and 1
March, 2012) in Hong Kong. It is as much a tribute to the
founding fathers as it is an applause for the Gen Next of Asian
hedge funds – and to the former we can only say that
'We Will Always Love You’.