Asian managers add money into own hedge funds

HONG KONG: Asian hedge-fund managers are putting more money into their funds, seeking to project confidence after the industry's worst performance streak since the 2008 financial crisis spurred redemptions.

Founders and employees of Asian firms including Greenwoods Asset Management, Doric Capital, LBN Advisers, SPQ Asia Capital and Zeal Asset Management are among those who put more personal wealth into their own hedge funds since a China equities rout started in June.

While it's common for hedge-fund employees to invest in their own offerings, putting their money at risk has taken on additional significance after a period of historic turbulence shook confidence.

Investors pulled almost US$2bill from Asia- focused hedge funds in the quarter ended September and may be poised to withdraw more, according to data provider EVestment.

China's benchmark Shanghai Composite Index has plunged almost 35% since a June peak and the MSCI Asia ex-Japan Index has shed more than 18% since an April high as China's economy cooled and investors there unwound leveraged bets. Asia-focused funds lost a cumulative 6.8% from June through September on average, in the longest losing streak since November 2008, according to Singapore-based data provider Eurekahedge Pte.

By the end of August, 32% of China- focused funds had posted cumulative losses since the start of the year, according to Eurekahedge data.

Plowing performance fees back into funds is a common practice that many hedge-fund managers do at their own discretion on an annual basis. Employees usually contribute 3% to 8% of assets of US hedge funds managing less than Us$1bil of assets, according to Daniel Celeghin, Asia head of Casey Quirk & Associates LLC, a Darien, Connecticut- based adviser to asset managers.

Several of the Asia-focused firms where employees invested their own money in past months posted gains in October.

At Greenwoods, which oversees US$7bil of assets in hedge and long-only funds, Shanghai-based chief investment officer George Jiang added money to a fund in July and August, said Hongong-based partner Joseph Zeng. Greenwoods’ flagship US$1.7bil Golden China Fund had monthly losses in excess of 8% in both July and August. It was little changed in September and generated an estimated 13% gross return last month through Oct 27, Zeng said.

The MSCI China Index, which tracks Hong Kong-listed Chinese companies, trades at around 10 times this year's estimated earnings, falling from a 10-year average of 12.5 times. The gauge has risen 6.8% since the end of August.

Doric's team plowed additional capital, including bonuses paid out of performance fees and savings, into its US$193mil Asia-Pacific stock hedge fund that invests in smaller companies in September and October, said investor relations manager Shawn Campbell. Doric employees represent about 19% of fund assets, he said. The Doric fund was down 0.9% in September and advanced 1.4% last month through Oct 23, according to Campbell.

At LBN Advisers, which oversees about US$600mil in hedge and long-only funds, staff added money into its two hedge funds since June, said a person familiar with the firm.

The cash injections, which weren’t used to fund redemption requests, brought employee stakes to 8% of the firm's assets, the person said. LBN China+ Opportunity Fund declined 12% in the first nine months, according to an investor update.

Partners and employees in early August and October added money to the US$225 million Greater China-focused SPQ Asia Opportunities Fund, said people with knowledge of the matter. With the latest injection, SPQ staff's share of firm assets has been restored to 20%, after investor inflows diluted it earlier, according to the people. – Bloomberg

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