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
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 investment strategies.
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
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 Asia.
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'.