Asian stock pickers struggled in the vintage for big picture hedge funds

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HONG KONG — Asian hedge funds are heading for their worst showing in decades, with short-term stock pickers misled by volatility in China, while macro-strategy funds driving major global shifts in interest rates shine.

China loosened rigid COVID-19 movement and testing controls, but the unexpected fallout from Beijing’s efforts to reduce economic inequality and President Xi Jinping’s consolidation of power were some of the factors dragging the performance of top managers with China’s long standing.

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Asian markets were broadly weak — the MSCI China China supplier index was down about 27% for the year to end November and its Asia ex-Japan index was down nearly 20%.

On average, Asian hedge funds fared better than indices, dropping 9.1% through the end of November, Eurekahedge data showed.

If the trend continues, that would be its worst annual performance since 2008. On a strategic basis, Asian equity short-term funds lost 12% and Greater China short-term funds lost 14%, while Asian macro funds gained 12% and multi-strategy funds gained 1%.

Past performance is not a guarantee of future returns, as stated in the disclaimer. This year clearly illustrates how difficult stock-taking will be and the forces driving this year’s allocation decisions persist into 2023.

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“The problem is that the market, so far, hasn’t put a lot of value on the fundamentals,” said Patrick Ghali, managing partner at hedge fund advisory firm Sussex Partners.

“No one can predict when the market will appreciate the fundamentals again. It feels until then, traders may be a better choice than market-reliant managers trading fundamentals.”

GRAVITY GITUNG

Star players have fallen back to earth as a triple hit from rising global interest rates, regulatory scrutiny and uncertainty over how capitalism fits into China’s economic goals have boosted growth stocks in widely held positions such as electric vehicles, e-commerce and other internet companies. . deep loss.

Aspex Management (HK) Ltd, which posted gains of 54%, 96% and 30% in the three years since its founding in 2019 peaked, with $7.4 billion worth of short-term funds down 9.8% over 11 months into November, according to documents reviewed by Reuters and two people familiar with the matter.

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Longbook, where top holdings included online retailers Alibaba and battered Sea, lost about 40%. The fund, managed by Hermes Li – formerly of US hedge fund Och-Ziff – declined to comment.

Singapore’s FengHe Group, founded by John Wu, the inaugural chief technology officer of Alibaba Group, saw its flagship FengHe Asia Fund lose 5% in the 11 months to November after a 27% gain in 2022, according to a document reviewed by Reuters.

FengHe did not respond to Reuters’ requests.

Zeal Asset Management in Hong Kong has a long-term bias fund of $148 million, down 31% on December 2, according to a document and a person with knowledge of the results.

Zeal said the company holds a “much more constructive outlook” for China’s equity market in 2023 due to accommodative policies in COVID-19 and real estate, low inflation pressures in China and historically low market valuations.

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TECH OUT

Getting defensive of China, or at least getting out of the battered tech sector, helps others.

“The old days of buying concept stocks or meme stocks are over,” said Wong Kok Hoi, chief investment officer at Singapore-based APS Asset Management, which manages $2.4 billion worth of assets.

All China Long Short Fund offshore APS fell 17%, while the onshore China long only fund rose 8% in yuan terms through November. Wong said he was being careful and had no exposure to internet platforms or e-commerce stocks.

Even better performing, Hong Kong-based Tairen Capital long-shorted equities, making 15% returns so far this year, according to people familiar with the results, mainly contributed by bets against technology stocks.

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Its assets under management grew to nearly $6 billion from $5 billion in March 2022, one of the sources said. Tairen did not respond to a request for comment.

Big picture macro funds, which trade on economic and political shifts, have also performed well, as US-China tensions and rising interest rates roiled financial markets.

Singapore-based flagship macro fund Asia Genesis Asset Management gained 15% for the first 11 months, largely thanks to shorts in US and Japanese stocks, according to the company.

Long positions in US government debt and the Singapore dollar also helped during November when many macro managers were caught off guard by the sudden drop in the US dollar.

“Our active, agile trading approach has worked out well,” said Chief Investment Officer Soon Hock Chua. He expects similar volatile conditions next year, but welcomes them.

“Swinging range markets will be difficult for many people but rewarding for active managers like us.”

(Reporting by Summer Zhen and Xie Yu in Hong Kong; Additional reporting by Tom Westbrook in Singapore; Editing by Jacqueline Wong)