Asia hedge funds largely avoided the Reddit turmoil that hammered some global peers last month, with many posting gains led by LyGH Capital and Pinpoint Asset Management. Snow Lake Capital and WT Asset suffered losses.
Asia managers that bet on rising and falling stocks using fundamental analysis were little changed in January, while those focused on China managed a 1.2% rise, according to a Goldman Sachs Group Inc. note to clients. That compared with the 5.9% average loss by global funds, Goldman said.
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The final week of the month saw funds give back some gains in an otherwise strong start to the year. Equity markets plunged on fallout from the short squeeze sparked by retail buyers of GameStop Corp. and other stocks. A liquidity crunch in China also hurt mainland stocks last week.
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Still, early indications from investors are that more Asia funds were up for the month than down, which could help attract more money to the region.
“It was a very good month up until last week, until China tightened liquidity, everything got sold off,” said Richard Johnston, Asia head of Albourne Partners, which advises investors on alternative investments. “For most people, that dominated anything that happened in the short squeeze.”
LyGH Capital’s hedge fund returned an estimated 8.2% after fees in January, driven by solar-related stocks and investments in consumer and technology companies, according to Grace Lu, chief investment officer of the Singapore-based stock picker with about $500 million in assets.
Pinpoint’s $1.7 billion namesake China fund returned 8.4%, gaining from themes including solar, domestic consumption and “made in China” hardware and technology, said Jennifer Wong, a managing director. Its $1.4 billion multi-strategy fund edged up 1.3%, making money from autos, higher education and the online economy.
Among decliners, Snow Lake, which oversees $3.6 billion, saw its Asia-focused hedge fund drop 8.9%, said a person with knowledge of the matter. The losses were mostly driven by bullish bets that declined. Shares of Macau casino operator MGM China Holdings Ltd. slumped 12% on the month as the gambling hub reported its first Covid-19 case since June. Snow Lake is the largest independent shareholder and has been urging it to sell a 20% stake to a Chinese backer.
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The fund returned nearly 22% last year. A representative for Snow Lake said they couldn’t comment.
WT Asset Management’s hedge fund lost an estimated 10% on bearish wagers, said a person familiar. That’s after last year’s 61% surge and a 200% gain since its 2017 inception. The fund has posted high-single digits annual gains on its short bets since it started, the person said.
Other notable funds:
- E-commerce, property services and renewable energy helped Torq Capital Management (HK) post a 2.5% return, said a person with knowledge of the matter. Led by a former Asia head of Balyasny Asset Management, it had a “mid-teens” gain for 2020 on its market-neutral strategy, as assets passed $1 billion. A representative for Torq said they couldn’t comment.
- Ovata Capital Management’s $650 million Asia- and equities-focused multi-strategy fund returned about 4.6%, the third-best month since its November 2017 inception. That adds to the 19% gain last year, according to Marc Hubert, head of new products and business development.
- Ovata profited from the pricing gaps between Chinese companies’ American depositary receipts and Hong Kong-traded shares, along with stock and convertible bond sales.
- The $2.3 billion Dymon Asia Multi-Strategy Investment Fund returned about 1.3% net in January, according to a spokesperson. Its Asian equity long short and rates strategies contributed most of the returns while currencies also made small gains.
China’s benchmark CSI 300 stock index rose 2.7% on the month, while the Hong Kong gauge added 3.9%, outpacing the 1.1% drop in the U.S. S&P 500 Index.