Wider Dispersion of Returns Points to Patchy Hedge Fund Performance in Asia

"If winning isn't everything, why do they keep score?"

Vince Lombardi, (1913-1970), football coach

According to recent hedge fund data (HSBC's Hedge Weekly #40) Asia's hedge fund performance continues to be patchy heading into the tail end of the third quarter and approaching the fourth. In fact, almost all categories continue to lag global multi-strategy managers that posted +6.75% on a YTD basis.

Asia's largest category of funds - those trawling pan-Asian equity markets - consist in the database of 18 funds (not firms) with AUM totaling $9 billion and YTD performance (on an equal-weighted basis) of -1.96%. The biggest gainer is Bob Karr's Joho Fund up 11.90% while the biggest loser was Everest Capital Asia with -12.26%.

In the small equity diversified Japan category with AUM of $1.238 billion for 7 funds, average performance was -0.24% with the largest gainer the Martin Currie ARF Japan Fund at +6.33%, with the largest loser SR Global Fund H - Japan with -12.82%.

Multi-strategy Asia specific funds also suffered a wide dispersion of returns but with overall performance -7.11%. This runs contrary to the performance of their global counterparts. It also runs contrary to the notion that they would be running more hedged arbitrage strategies, unless of course, they were more directionally positioned than previously thought. The largest gainer was LIM Asia with +2.92% while the largest loser was Artradis Barracuda Fund with -18.21%.

As we have already explained, investors looking at Asia should be particularly comfortable with NASDAQ type of return/volatility in a portfolio, and if you are not making the 15-20% returns then you would be better served taking a passive investment in a cheaper ETF that focuses on the beta. The other option is to focus on Asian fixed income and other private equity type deals even though the payback is likely to be longer, albeit with a high attractive IRR. Mahalo.