Asia-based hedge funds surged ahead of their global counterparts in the first three quarters of the year, buoyed by a strong rally in Chinese stocks last month, marking a reversal of three years of underperformance for the region’s funds, according to a report by Bloomberg.
Key players like Will Li’s Ocean Arete Ltd and Timothy Wang’s Monolith Management saw gains from their bets on China introducing more aggressive stimulus measures.
A nearly 5% rise in September brought Asia hedge funds’ year-to-date returns to 9.7%, surpassing the global average of 8.1%, according to Eurekahedge Pte indexes. In September alone, Asia-focused funds posted an average 4.9% gain, compared to the global average of 1.5%.
China’s stimulus measures followed a half-point rate cut by the US Federal Reserve, which allowed Beijing to implement easing policies without fearing a significant currency depreciation. The MSCI China Index soared 23% in September, its largest gain in almost two years, as the Chinese government lowered banks’ reserve requirements and allowed millions of households to renegotiate lower mortgage rates. This surge brought the index’s nine-month return to roughly 25%.
Funds that focused on China were not the only ones seeing remarkable gains. Li’s Arete Macro Fund, for example, made bullish trades on Chinese equity index futures in early September, resulting in a 7.5% return for the month and pushing its year-to-date returns to over 13%.
Timothy Wang’s Monolith Management, which manages over $300 million in assets, saw its global technology fund rise by 16% in September, increasing its gains for the year to 50%. Wang’s fund shifted toward China in mid-September, anticipating further economic support from the government. The fund’s performance was bolstered by significant gains in companies such as PDD Holdings Inc, Futu Holdings Ltd., KE Holdings Inc., and TAL Education Group.
Other funds benefited from a diverse range of trades. The $4bn Quantedge Global Master Fund gained 7.4% in September, extending its 2023 advance to 29%, driven by fixed income and commodities. Hermes Li’s Aspex Master Fund, with $9 billion in assets, saw a 5.6% gain in September, pushing its nine-month performance to nearly 33%, thanks to successful trades across China, Japan, and various sectors including technology, financials, and industrials.
Jim Lim’s Modular Asian Macro Fund also experienced gains, rising 1.6% in September and bringing its year-to-date return to 5.6%. Lim capitalised on macroeconomic trends such as China’s surprise rate cut, rising Singapore rates, and a stronger Malaysian Ringgit.
Pascal Guttieres’s new equity capital markets fund saw a 2.1% gain in September, its first full month of trading, benefiting from block trades, global depositary receipts, and index rebalancing. The inclusion of Alibaba Group Holding Ltd in an exchange link program allowing mainland Chinese investors to trade its Hong Kong shares helped the stock surge 27% in September.
James Chen’s Ovata Equity Strategies Fund achieved a 4.1% gain in September, with a 13% return for the first nine months, thanks to trades profiting from stock index adjustments, price swings, and convertible bonds.
