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Asian shares fall on hedge fund liquidation talk…

Asian shares fell and the Australian dollar eased on Thursday as sentiment was shaken by talk across global markets that a hedge fund had been liquidating large positions in commodities, as well as worries the Federal Reserve could slow its bond buying programme.

Crude oil posted its biggest daily fall year to date, on Wednesday, while gold fell nearly 3 per cent to a seven-month low in its biggest single-day drop in almost a year. The CBOE Volatility Index, which gauges investor risk appetite on Wall Street, rose 19 per cent in the biggest jump this year.

"We all heard the hedge fund rumour and price action appeared to back such a rumour, but nobody has seen hard news," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. "The price action also happened at the same time as the Fed's minutes which suggested the risk of an exit (from the quantitative easing), so it's natural that money which had fled the dollar was returning, such as from gold. I think the fallout from the Fed's minutes will continue this session, prompting some money to head towards the dollar," Mr Saito added.

The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent, snapping a three-day rising streak and off its highest levels since August 2011 reached on Wednesday.

South Korean shares opened down 0.5 per cent after hitting a one-month high the day before while Tokyo's Nikkei stock average opened 0.6 per cent lower, after closing on Wednesday at its highest since late September 2008.

Following a difficult 2012 for Asia’s hedge fund industry, 2013 is getting off to its best start in years.
Particularly for hedge funds with a focus on Japan as risk returns to equity markets.

This January was the best-performing January for hedge funds in the region on record, according to data from EurekaHedge, with hedge fund returns up on average 4.15percent. Japan funds posted their best monthly return since Dec. 2005, up 5.25percent. Asia ex-Japan funds returned 4.02percent in January, outperforming the MSCI Asia Pacific ex-Japan Index which was up 3.02percent. By comparison, the EurekaHedge Hedge Fund Index, which measures hedge fund performance globally, returned 2.32percent in January on average.

But this year’s strong performance comes after a trying time for the industry in 2012, with 123 new fund launches, and 148 closures, according to the data. Small funds in particular have suffered, as even though large, global institutional investors are allocating more capital to the region, many still favor bigger more established funds.

According to EurekaHedge, the number of closures in 2013 won’t be “substantial,” but launch activity will remain subdued, and successful new funds are likely to have the “backing of strong cash-rich institutions.”

The Alternative Investment Management Association (AIMA), the global hedge fund association has named two deputy chairmen from its existing directors.

The new deputy chairmen are Andrew Bastow, head of government and regulatory affairs and general counsel, Winton Capital Management; and Chris Pearce, Asia chief operating officer at Marshall Wace Asia. The new investor-appointee is Robert De Rito, who is head of financial risk management, APG Asset Management US.

Bastow has been Winton’s general counsel since 2005 and leads its engagement with regulatory bodies and lawmakers in Europe, the US and the Far East. He was elected to the AIMA Council in September 2010.

Pearce has been COO of Asia for global long-short manager Marshall Wace since 2006. Having opened the firm’s Hong Kong office, he oversees operations in the Asia region. He was first elected to the AIMA Council in September 2010 and is Chairman of AIMA’s Pan-Asia regional advisory council.

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