As global markets plunged in the first month of the Chinese New Year, the trades that generated the most profit in 2013 came under fresh critique. One of the most noteworthy dips was seen in Japanese markets, where the Nikkei fell nearly 10 per cent in the last month and the yen gained 3 per cent against the US dollar.
These swings brought losses to Japan-focused hedge funds, which won the crown with outsized gains in 2013. Japan was not the only market that reversed course. Emerging markets, EU and U.S all shook at the beginning of the year. The S&P 500 plunged in January and then recovered. Hedge funds have now positioned themselves in the net short zone of S&P 500 futures for the first time since September 2012, according to Bloomberg. Looking at hedge fund returns for January, Japan and Emerging Markets took the biggest fall. The Fed’s decision to taper has broken the prolonged rally in EMs with investors rushing to pull out their money.
Brevan Howard, Europe’s largest hedge fund, made the decision to shut down its USD2 billion emerging markets strategy in the wake of recent sell-off. The fund managed by Geraldine Sundstrom was struck by a wave of losses and ended 2013 with a -15 per cent return. Brevan Howard’s fixed income strategy, Emerging Markets Fixed Income Fund, was down 0.24 per cent in January. This high profile hedge fund is not the only one which has closed shop: Avantium Investment Management, founded in 2011 and once a USD800 million fund, is also wrapping up business. The fund was focused in emerging markets and suffered a 4.5 per cent loss in 2013.
According to data from HSBC Hedge Weekly, on average an equity-focused emerging market fund plunged 4 per cent in last month. Adelphi Capital’s Emerging Europe Fund took a loss of 5.3 per cent whereas Armajaro Emerging Markets Fund was down 0.14 per cent in January. A couple of Russian equity hedge funds also found themselves on the losing end, Firebird New Russia Fund was down 7.2 per cent whereas Kaltchuga Russian Equities Fund fell the most with a 10.2 per cent loss in January. SR Global Opportunities and SR Phoenicia Fund lost 3.7 per cent and 3 per cent respectively in January.
Long-only strategies tumbled as well – the USD1.6 billion Russian Prosperity Fund lost 3 per cent through January 24 whereas the USD50 million Moneda Chile Fund suffered a loss of 11 per cent. BlueCrest Emerging Markets strategy also slipped 0.4 per cent; the fund manages USD1.8 billion.
In Japan, Citi recently released a bullish note on the equity markets and noted that Abenomics will likely bring high earnings growth in the corporate sector. While it may take longer for the emerging markets to rekindle their lost glory, the future looks slightly better for the developed economy of Asia. As for the hedge fund industry, some big gainers of last year reversed course in 2014. Sloane Robinson’s SR Global Fund Japan plunged 9 per cent in January alone after reporting a gain of 62.5 per cent in 2013. Symphony Financial Partners’ SFP Value Realization Fund slipped 3.18 per cent in last month, the fund was the highest gainer with a 82 per cent return in 2013.
Hedge funds launched in Asia in 2013 raised a fifth less than a year before as more managers launched funds with smaller sizes, according to a survey.
As funds found it tougher to attract investors in one of the industry's quietest years since the global financial crisis in 2008, new funds raised USD3.85 billion, according to the twice-a-year survey from AsiaHedge. That was down from a record USD4.74 billion in assets in 2012.
The number of new hedge funds increased by about a tenth to 71 in 2013 from 65 a year earlier, indicating that launch sizes got smaller.
Last year's collection featured only one fund, from Asia Research & Capital Management, that raised USD1.1 billion in the region's biggest launch last year.
Hong Kong strengthened its position as Asia's hedge fund capital last year as more than half of the assets raised by new funds flowed into the city's managers.
Rival Singapore-based managers raised only USD469 million, the survey showed.
Dymon Asia Capital (Singapore) Pte is joining with Carl Vine, a former SAC Capital Advisors manager, to start a global equity long-short hedge fund with a bias toward the Asia-Pacific region.
The Port Meadow fund will be run by an investment team headed by Vine, based in in Oxford, the UK, and will seek USD500 million, said Dymon President Jay Luo. Vine will be the chief investment officer of Port Meadow, a division of Dymon, that will drive investments, while Dymon will provide infrastructure support, Luo said.
Dymon, one of Asia’s largest hedge funds, is expanding globally by providing non-investment services to help managers start their own funds. In 2012, Singapore-based Dymon hired Luo, who was the former head of SAC Capital’s Asia-Pacific operations, and Chief Executive Officer David Chan, a former head of macro trading at Goldman Sachs Group Inc., after ranking as the top-performing large hedge fund in Asia in 2011.
Shares in Jupiter Fund Management spiked up by as much as 5 per cent this morning, making the firm one of the strongest risers in the FTSE All-Share, after it announced a higher-than-expected hike in its dividend – allowing its departing CEO to go out with a bang.
Jupiter reported 2013 pre-tax profits of GBP114 million on Thursday 27th, a 55 per cent rise on GBP74 million during 2012. Edward Bonham Carter, the outgoing chief executive, said: "We have had a good year."
Jupiter said it had repaid the last of its company debt, GBP11 million, earlier this month and unveiled a hike in its dividend to 12.6p per share, beating analysts' average expectation of 11.3p. It has GBP160 million of spare cash. The company said its strong balance sheet increased "the potential for increased returns to shareholders going forward".
The firm's shares hit a high of 421.2p, up over 5 per cent from the opening. They fell back to 416.7p, up 3.7 per cent, as of midday, but this still meant the firm was one of the 10 strongest risers in the FTSE All-Share Index.
Jupiter's finance director Philip Johnson said: "As we look forward from this point, we will be looking to use some of our operating cashflow to pay ordinary dividends, some to invest for future growth of the business, and in about a year's time, the board will have a decision to make about other ways to return some of this cash to shareholders."
Maarten Slendebroek, who will take over as chief executive on March 17 when Bonham Carter steps down, said the firm was focusing on organic growth primarily, including sales opportunities in continental Europe and Asia, where it is now up to "full battle strength" after building up a team of six for its Hong Kong office last year.
Jupiter took in a net GBP1.2 billion of new money into its funds last year, as previously announced in January, taking its assets under management to GBP31.7 billion. Bonham Carter added that "for the first time in Jupiter's history" fixed-income funds were more important than equities to those inflows.
The firm's heavy reliance on equity products has been a concern for analysts in the past, and further diversification of the business will help allay those fears. Philip Johnson, the firm's chief financial officer, said fixed-income assets had risen from 7 per cent of the firm's total to 9.9 per cent during 2013, or from GBP2 billion to GBP3 billion.