Hams Schlaikier, Hedgeweek

Japanese hedge funds lead Asia to five year high… Ex-JP Morgan traders launch Asian firm…

Investors increased allocations to Asian hedge funds in 1Q13 as stimulus measures; quantitative easing and increased bond purchases by the Bank of Japan drove gains across both equities and the HFRX Japan Index.

Total Asia-focused hedge fund capital increased by +7.6 per cent in 1Q13 to nearly USD95 billion, reaching the highest level since Asian hedge fund capital peaked in 2007, according to the latest HFR Asian Hedge Fund Industry Report. Investors allocated over USD1.3 billion in net new capital to Asian hedge funds in 1Q13, the largest quarterly inflow since 3Q11, as the total number of Asian hedge funds increased to more than 1,150.

The HFRX Japan Index posted a gain of +11.7 per cent for the quarter, the strongest quarterly gain since 4Q05, exceeding the 1Q13 gain of the S&P 500. HFR estimates nearly 370 hedge funds invest primarily in Japanese capital markets, including equity, debt and currency, while an additional 270 funds invest across pan-Asia (including both Emerging & Developed) and over 500 funds invest in Emerging Asia. Hedge fund performance across Emerging and blended, pan-Asian exposure was also strong for the quarter, with the HFRX China Index gaining +6.9 per cent, HFRX Equal Weighted Asian Index gaining +8.4 per cent and the HFRX Asian (ex-Japan) Index gaining +6.7 per cent; each outperforming the decline in the Shanghai Composite Index. Reversing a portion of the strong gain of +27.6 per cent from 2012, the volatile HFRX India Index posted a decline of -7.5 per cent in 1Q13.

The trend toward establishing a hedge fund’s management firm in local Asian markets also continued, with the percentage of Asian hedge funds located in China, Singapore, Japan and India all increasing since 1Q12, while the per cent of these located in the US and UK continued to decline. Nearly one third of all Asian hedge funds are now located in China, while nearly 11 per cent are located in Singapore; the number of funds located in Japan and Australia combined for over 9 per cent.

Five former proprietary trading desk bankers at JP Morgan in Singapore have started a new firm, linking up with one of Canada's largest mutual funds to launch the business.

Dhimant Shah, 41, the former head of proprietary trading at JP Morgan Chase & Co in Singapore plans to launch two funds investing in credit markets as reported by Reuters. The funds will also bet on foreign exchange, equity indices and interest rates.

US regulators have effectively ended the traditional practice of banks trading their own money through prop desks, prompting hordes of traders to strike out on their own.

What makes the JP Morgan Singapore spinout unique is the support it is getting from Canada's Mackenzie Investments, the USD64 billion money-manager.

Traditional Western asset managers such as Aberdeen Asset Management plc and BlackRock Inc, in their efforts to expand in Asia, have followed the standard path of launching mutual funds and other products familiar to them.

Mackenzie, by contrast, is hooking up with the prop team to plant the Canadian group's flag in Asia, a strategy that comes with heftier risks and rewards. Shah did not disclose the initial investments in the funds but people with direct knowledge of the plan said Mackenzie's backing includes a USD100 million start-up capital for a long only fixed income fund, and USD20 million for a long/short hedge fund that will combine credit and macro strategies.

Macro hedge funds focus on major economic trends and events and place bets anywhere they see value, including stocks, bonds, currencies, commodities, and derivatives markets. Such funds collected a net USD18 billion last year, according to data from Eurekahedge, the most by any hedge fund category in the world. Credit and macro hedge funds in Asia such as Double Haven, Dymon Asia Macro and Fortress Asia Macro have raised hundreds of millions of dollars from investors in the last two years. But with interest rates at record lows and yields falling, investors are wary of taking a directional view on credit at these levels and are layering it with other asset classes.

Hedge fund firm Centaurus Capital is returning external investors all of their money after clashes with them over where the best money-making opportunities lay, a source familiar with the firm said.

The partners of the London-based firm will now only trade using their own cash after investors challenged a decision to focus on so-called "event-driven" strategies such as bets on company takeovers, the source said.

There has been no decision about whether to close any of its three funds, the source added.

Centaurus confirmed it was returning money to investors but declined to comment further. Centaurus will also close its Asia office in Hong Kong, four sources familiar with the matter said. The decision will result in the departure of its entire Asia team including fund manager Kim Yu Ang.

Centaurus is the latest hedge fund to focus on managing its founders own fortune rather than working for others. Centaurus joins the likes of New York-based hedge fund Perry Capital and UK-based Wessex Asset Management in retreating from Asia since 2011. The firm expects to have returned all investor cash over the next few weeks, the source said.

International law firm Simmons & Simmons has announced that it is opening an office in Singapore. It will be the firm’s fifth office in Asia, after Beijing, Hong Kong, Shanghai and Tokyo. Commenting on the opening, Simmons & Simmons’ Managing Partner Jeremy Hoyland, said: ‘‘We are pleased about the granting of a license to operate in Singapore by the Attorney General’s Chambers (AGC), and the opening of our first office in South East Asia.’’ 

‘‘We are expanding our Asia practice in response to the demands of both our international clients and Asia domiciled clients across the region, and in particular, their requirements around the increasing levels of intra-regional investment and trade activity.  Our focus will be on the cross-border transactional and disputes needs of clients in the Asset Management, Energy & Infrastructure, Financial Institutions, Life Sciences and TMT sectors,’’ he added.

Four partners and a team of associates will join the Singapore office. The initial four partners will be: Dan Marjanovic, Alexander Shepherd, Jason Valoti and Peter Wright. 

The Singapore office will be located in the Marina Bay Financial Centre, which is Singapore’s largest integrated mix-use development and includes other international law firms and financial institutions. The firm will share an office with TMI Associates, Simmons & Simmons’ alliance firm in Japan.  The two firms will collaborate on marketing activity as well as servicing the needs of both firms’ Japanese clients in the region.

The announcement comes during a period of expansion for Simmons & Simmons, with recent office openings in Munich in March this year, and the opening of its innovative operations in Bristol in October 2012.

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