Hans Schlaikier, Hedgeweek

Hedge funds enjoy USD18.6bn in inflows in April… Tiger Management backs new Asia focused fund…

Thu, 26/06/2014 - 09:22

Global hedge funds investors added USD18.6bn in new money to portfolios in April, nearly twice as much as the amount of new cash they sent in March, data from industry groups TrimTabs and BarclayHedge showed.

Multi-strategy hedge funds were the most popular, attracting USD6bn while fixed income funds took USD5bn and event-driven funds saw inflows of USD3.2bn. As hedge fund performance numbers are reported more quickly than flow data, BarclayHedge said the average hedge fund earned 1.99 per cent through May, less than the 4.9 per cent gain that the S&P 500 made.
 
The Wall Street Journal reports that Julian Robertson's Tiger Management LLC is backing startup hedge fund Kang Global Investors LP with as much as USD50 million for its launch at the start of July, according to people familiar with the arrangement.
 
Long considered one of the savvier long-term investors in the industry, the 81-year-old Mr. Robertson shut down his own hedge fund in 2000 and shifted to doling out his money to other managers. These selected funds now manage some USD27 billion altogether. The billionaire's reputation is such that budding hedge-fund managers are frequently willing to take tougher terms in exchange for his money, and endorsement. In this latest deal, the new hedge fund's founder, Richard Kang, agreed to pay about 20 per cent of his fees earned, forever, to Mr. Robertson's Tiger in what is known as a "seed deal," the people said.
 
Mr. Kang, who didn't respond to a request for comment, was earlier an analyst at Tiger Asia Management LLC, a Tiger-seeded fund that grew to manage more than USD5 billion at its peak, but was later rocked by insider-trading investigations in the U.S. and Asia. In 2012, it decided to return outside cash and is now called Archegos Capital Management LLC
 
Kang Global is similarly expected to have a focus on Asian investments. It will compete against other Asian-focused startups including Saferidge Capital Partners, the spinout of Asian Century Quest Capital LLC, once one of the largest hedge-fund firms focused on Asia.
 
Tiger Management is now run by Mr. Robertson's son, Alex, and the firm's former head trader: Gil Caffray. Mr. Robertson remains a senior adviser. His prior seed investments include Chase Coleman's USD6.5 billion Tiger Global L.P. The technology-focused Tiger Global is up 8.6 per cent this year through the end of May, people familiar with its performance said, far outpacing the average hedge fund tracked by HFR Inc.
 
Japanese investors plan to maintain the size of their hedge fund allocations this year, according to a survey by AIMA Japan and Eurekahedge.
 
The survey of more than 130 investors with over USD3.8 trillion in assets revealed that the average percentage of their alternative investment portfolio going to hedge funds will remain the same for 2014 as for 2013, at 72.5 per cent.  
 
The survey follows strong recent performance by Japanese-investing hedge funds and funds of funds, which were up about 28 per cent on average in 2013.
 
Many respondents indicated that they intend to raise their exposure to long/short equity hedge funds and event-driven strategies, with allocations on average being reduced to CTA/managed futures funds, macro funds and fixed income strategies.
 
The survey found that most Japanese investors plan to increase their allocations to global, Asia ex-Japan and Middle East/Africa mandated funds, while trimming their portfolio exposure to Latin America and Europe. Their exposure to Japan would continue at existing levels.
 
For the majority of the investors in the survey, performance, risk management and track record were the key factors behind their investment decisions. Brand names, governance structure and liquidity ranked lower on the scale.
 
In terms of regulatory challenges facing the industry, more than one-third of investors cited the prospect of increased inspections and regulations as the biggest regulatory issue facing the hedge fund industry in Japan. Around one-quarter of the respondents also said they were concerned about the impact of the US Dodd-Frank Act and the need for managers to register with the US Securities and Exchange Commission. A similar proportion expressed concerns about tougher capital requirements for funds under Basel III.
 
Asked about the prospects for the Japanese economy, the mostly Japanese-based investors in the survey expressed generally positive sentiment. Almost 90 per cent regard the economic policies of the Japanese Prime Minister Shinzō Abe – dubbed “Abenomics” – favourably, while 72 per cent predicted that its positive impact will continue in 2014. Regarding the Nikkei 225 index, 72 per cent expected it to finish the year above the 15,000 mark and 51 per cent thought it could reach higher than 20,000.
 
Paul Saferstein is planning to launch a hedge fund in the fourth quarter of this year to be called Saferidge Capital Partners after Asian Century Quest Capital LLC winds down, reported The Journal. The new fund will be headquartered in New York and will bet on and against Asian shares.
 
The 44-year-old Safestein decided to put up a new hedge fund after Brian Kelly, founder of the once USD2bn ACQ, announced plans to wind down the fund after suffering losses from miscalculating Japan’s Abenomics. The historic rally of the Japanese stock market in 2013 proved hurtful for ACQ which shorted some Japanese stocks. Last year, Tokyo’s shares closed at a historic six-year high following a 57 per cent surge in the benchmark Nikkei 225 stock average.
 
ACQ's flagship fund posted a 5.5 per cent return in 2013, compared with a 14 per cent gross return for the MSCI All Country Asia Index. ACQ’s bets against Japanese stocks ate away most of its profits last year. ACQ managed some USD2bn in assets in mid-2012 but the fund shrank to an estimated USD100m in early this year as investors redeemed most of their money. Kelly returned over USD500m to investors at the end of 2013.
 
Paul Saferstein is starting the new stock-hedge fund, Saferidge Capital Partners, in the fourth quarter of this year. The fund, which will bet on and against Asian shares, will be based in New York. Saferstein said he expects to launch with a roughly five-person investment team, with several joining from ACQ.
 
Saferstein, 44 years old, ran a small fund at New York-based ACQ and was one of six sector heads who reported to ACQ founder Brian Kelly, formerly of Maverick Capital Ltd.

Kelly will serve as a senior adviser to Saferidge and plans to invest in the fund, people with knowledge of the matter said.
 
Saferidge will enter a busy field for Asian hedge fund launches this year, as cash from pension funds and other large investors encourages managers to venture out on their own.

Close to 70 funds have started trading or are setting up Asia strategies so far in 2014, more than average for the region, according to Bank of America Merrill Lynch estimates. Saferstein described Saferidge as a fundamental, long-short equity fund that, while holding 30 to 50 positions at a given time, would concentrate its exposure in its top 10 positions, similar to the fund he ran at ACQ.
 
Saferstein said he expects Asian companies to have a growing amount of free-cash flow in the next several years as they become more efficient in allocating capital because of economic-overhaul plans in China and Japan.


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