By Aradhna Dayal
around Asia are predicting an unusually long and heavy typhoon
season this year, thanks to dramatic shifts in weather patterns
globally. Strolling along the Victoria harbour, one can easily
see the ominous clouds that engulf the stunning Hong Kong
skyline almost every afternoon, and boats – all the
way from humble sampans to luxury yachts – battening
down hatches in anticipation of choppy waters.
Back at the desks of most portfolio managers in Asia, the
scenario is not very different. May proved to be an
excruciatingly tricky month for Asian hedge funds, with
declining markets threatening to wipe out the year-to-date
gains that had been so painstakingly cultivated by funds in the
The worsening macro storm this time came from within the
region, with beleaguered India on the brink of losing its
investment-grade status (in its recent report titled Will India
be the first BRIC fallen angel?, global credit-rating agency
Standard and Poor’s hints at the pos-sibility of a
downgrade of India’s sovereign credit rating to
'speculative’). Back in Europe, an escalating
threat of Greece’s disorderly exit from the euro
(and talks of Spain and Italy being next in line) has sparked
off major fears of a systemic risk crisis once again.
What has impressed me, however, has been the surprisingly
effective downside and capital-preservation skills Asian
managers have shown this time round – so far at least.
The AsiaHedge Composite Index was down 2.99% for May, bringing
the year-to-date industry performance to 0.94%. While these may
not be very impressive numbers on their own, compare them to
the benchmark figures (the MSCI Asia Pacific lost 10% in May
and 1.32% year to date) and we can begin to see why there has
been no significant capital exodus from the region despite
tepid performance this year.
A combination of factors is at play here. Firstly, this
signals a new level of maturity in the Asian hedge fund space,
both at a structural and investment process level.
Structurally, the industry has gravitated towards larger, more
institutional-size hedge funds due to the ongoing industry
consolidation and rising barriers to entry that facilitate
fewer but mostly bigger launches today. Most of these firms
tend to be multi-strategy and are able to nimbly allocate
capital between strategies and asset classes depending on the
Also, the profile of a typical portfolio manager is
radically different from what we saw five years back. Most
successful Asian funds today are run by second-generation hedge
fund managers that have branched out from large international
or local hedge fund shops, have deep experience and practise
seasoned investment processes, risk management and active
shorts to counter tough market cycles.
Given this background, AsiaHedge turns the spotlight in this
issue on several such highly experienced Asian managers that
have preserved capital over various market cycles, and are
growing their existing funds or launching their own ventures.
These including Alexander West’s Blue Pool
Capital, Australia-based MST Capital, RG Investment Capital,
Toby Douglas Bartlett’s Arena Capital, Expedition
Advisors and Crescent Hill Capital.
AsiaHedge will also be increasing its focus on performance
stories starting this issue, featuring strong outliers on both
sides. This month, we feature managers such as systematic
commodity trader Earth Element Fund (up 7.55% in May) and
Quantedge Capital (up almost 22% this year by end-April).
Also in line with increasing investor demand for
non-correlated strategies such as credit and macro, we bring
you a detailed report on the emergence of Asian credit
strategies and the opportunities and challenges that managers
are seeing in this space.
Finally, continuing with the tradition of AsiaHedge
Q&As, we bring you interviews with two of
Europe’s best-known industry figures: Michael
Hintze, founder and CEO of London-based CQS, and Peter
Fletcher, managing director of Swiss family office Parly
Company S.A. Hintze talks about CQS’ evolution
from a convertibles and credit house to a multi-strategy firm,
as well as the issues that are reshaping his corporate and
investment strategy today. Fletcher, a pioneer of Asian seeding
and allocations, discusses the changing mindset and investment
strategies of European family offices today.
In addition, this issue carries our annual fund
administration survey, showcasing the state of the market in
this important area of the industry today.