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Asian hedge funds look to safe haven after January crash

February 17
7:47 AM 2016

After witnessing positive phase in 2015, hedge funds in Asia suffered the most in January 2016 and heading nowhere to hide. The sell-off across the financial markets in January made hedge funds suffer losses over 10 percent in just one month alone. 

Cutting across the line, all the markets including stocks, currencies, commodities and risky bonds were tumbled in a panic selling pressure in January 2016. Hedge funds such as Quam Asset Management Ltd. and Greenwoods Asset Management Ltd fell over 10 percent. Asia-focused hedge funds dropped 3.1 percent indicating the worst beginning since 2008.

Bloomberg observes that about 81 percent of hedge funds are active on Asia long-short equities category, but they had negative returns. Singapore-based Eureka hedge Pte said that there was no way left for hedge funds to avoid bloodbath on the Street as they averted losses last year. 

Chris Choy, chief investment officer for the Quam China Focus Segregated Portfolio, said: "January was a bloodbath to the whole world. Unless one had a crystal ball, it was very difficult to avoid losses, whose $126 million Quam China Focus fund fell 16.7 percent in January."

Hedge funds managed to avoid losses in 2015. The returns from other parts of the world markets setoff these losses despite volatility in the global bourses. The sluggish global markets and weaker oil price are forcing investors towards safe havens. The latest market crash eroded $7 trillion in stock markets value globally. Chinese equities fell 23 percent in January and Standard & Poor's 500 index dropped 5.1 percent. 

Hedge funds' assets under management (AUM) were $2.24 trillion by the end of 2015. The assets grew by $108.7 billion in 2015. Investor inflows added to three-fourth of the industry. Asian fund managers witnessed weakest returns since August 2015 as Greater China-focused funds declined 5.76 percent in January and Japan-focused funds fell 2.71 percent, according to Value Walk

Oil prices tumbled to 12-year low to $26 a barrel. The losses in high-yield bonds also further widened. Funds with a focus on Greater China declined 7.6 percent in January. Geoffrey Barker, who manages the Counterpoint Asian Macro Fund, said: "January was exceptional in terms of the speed and ferocity of the declines in many markets and was in some ways reminiscent of early 2009 in the urgency of the selling."

Meanwhile, hedge funds' rout impacted billionaire investor Warren Buffett as well. He suffered loss in the eight year of $1 million 10-year wager. However, Fortune's Carol reports that Buffett has a big lead, as reported by CNBC. The Vanguard 500 index Fund Admiral shares rose 65.7 percent. This fund tracks S&P 500 index. This is much above the 21.9 percent average growth of five hedge funds. The inexpensive plain stock index fund is performing well against the high-fee hedge funds. 

The Counterpoint fund also suffered 3.2 percent losses during the month. This fund manages $109 million assets. Wrong decisions on funds investments made the fund suffer losses. Some hedge funds see opportunities after the high volatility in the global markets. George Jiang-led Greenwoods Asset Management's Golden China fund manages $1.7 billion assets and it lost 11 percent in January. Greenwoods' Jiang says the market volatility has provided several investment opportunities. 

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